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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☑☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended SeptemberJune 30, 20162020
 
Or
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from          to
 
Commission file number 000-52049

SYNCHRONOSS TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Delaware06-1594540
(State or other jurisdiction of

incorporation or organization)
(I.R.S. Employer

Identification No.)
200 Crossing Boulevard, 8th8th Floor
Bridgewater, New Jersey
08807
(Address of principal executive offices)(Zip Code)
 
(866) 620-3940
(Registrant’s telephone number, including area code)

(Former name, former address, and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑x No ☐¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☑x No ☐¨
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ☑☐
Accelerated filer☐x
Non-accelerated filer☐
☐
Smaller Reporting Company☐
Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑x
Shares outstandingSecurities registered pursuant to Section 12(b) of the Registrant’s common stock:
Act:
ClassTitle of each class Trading Symbol(s)Outstanding at October 31, 2016Name of each exchange on which registered
Common stock, $0.0001Stock, par value $.0001 par value
 SNCR45,326,842The Nasdaq Stock Market, LLC

As of August 10, 2020, there were 45,735,138 shares of common stock issued and outstanding.


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SYNCHRONOSS TECHNOLOGIES, INC.
FORM 10-Q INDEX

PAGE NO.Page No.
3
3
3
4
45
6
58
69
2131
3242
3244
3345
3345
3345
3445
3445
3445
3445
3546
3647




Table of Contents
PART I.  FINANCIAL INFORMATION
 
ITEM 1.  CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND NOTES

SYNCHRONOSS TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands)
(Unaudited)
 June 30, 2020December 31, 2019
ASSETS
Current assets:
Cash, restricted cash and cash equivalents$42,771  $39,001  
Marketable securities, current—  11  
Accounts receivable, net57,332  65,863  
Prepaid & Other Current Assets47,888  38,022  
Total current assets147,991  142,897  
Non-Current Assets:
Property and equipment, net18,659  26,525  
Operating lease right-of-use assets46,913  53,965  
Goodwill222,854  222,969  
Intangible assets, net72,910  77,613  
Other Assets, non-current12,325  8,054  
Total Non-Current Assets373,661  389,126  
Total assets$521,652  $532,023  
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$22,948  $21,551  
Accrued expenses73,506  65,987  
Deferred revenues, current46,958  65,858  
Debt, current10,000  —  
Total current liabilities153,412  153,396  
Deferred tax liabilities2,161  1,679  
Deferred revenues, non-current16,315  21,941  
Leases, non-current53,495  60,976  
Other non-current liabilities3,285  4,589  
Redeemable noncontrolling interest12,500  12,500  
Commitments and contingencies
Series A Convertible Participating Perpetual Preferred Stock, $0.0001 par value; 10,000 shares authorized; 233 shares issued and outstanding at June 30, 2020218,482  200,865  
Stockholders’ equity:
Common stock, $0.0001 par value; 100,000 shares authorized, 51,619 and 51,704 shares issued; 44,457 and 44,542 outstanding at June 30, 2020 and December 31, 2019, respectively5  5  
Treasury stock, at cost (7,162 and 7,162 shares at June 30, 2020 and December 31, 2019, respectively)(82,087) (82,087) 
Additional paid-in capital517,794  525,739  
Accumulated other comprehensive loss(34,397) (33,261) 
Accumulated deficit(339,313) (334,319) 
Total stockholders’ equity62,002  76,077  
Total liabilities and stockholders’ equity$521,652  $532,023  
(In thousands)
 September 30, 2016 December 31, 2015
ASSETS
Current assets: 
  
Cash and cash equivalents$123,319
 $147,634
Marketable securities16,973
 66,357
Accounts receivable, net of allowance for doubtful accounts of $1,123 and $3,029 at September 30, 2016 and December 31, 2015, respectively217,307
 143,692
Prepaid expenses and other assets48,242
 49,262
Total current assets405,841
 406,945
Marketable securities3,968
 19,635
Property and equipment, net168,083
 168,280
Goodwill315,185
 221,271
Intangible assets, net215,666
 174,322
Deferred tax assets1,904
 3,560
Other assets14,082
 16,215
Total assets$1,124,729

$1,010,228
    
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities: 
  
Accounts payable$28,724
 $26,038
Accrued expenses54,066
 45,819
Deferred revenues26,106
 8,323
Contingent consideration obligation8,229
 —
Short term debt38,000
 —
Total current liabilities155,125
 80,180
Lease financing obligation - long term13,082
 13,343
Contingent consideration obligation - long-term—
 930
Convertible debt225,938
 224,878
Deferred tax liability 1
26,397
 16,404
Other liabilities20,399
 3,227
Redeemable noncontrolling interest52,616
 61,452
Stockholders’ equity: 
  
Preferred stock, $0.0001 par value; 10,000 shares authorized, 0 shares issued and outstanding at September 30, 2016 and December 31, 2015—
 —
Common stock, $0.0001 par value; 100,000 shares authorized, 49,309 and 48,084 shares issued; 45,315 and 44,405 outstanding at September 30, 2016 and December 31, 2015, respectively3
 4
Treasury stock, at cost (3,994 and 3,679 shares at September 30, 2016 and December 31, 2015, respectively)(95,183) (65,651)
Additional paid-in capital 1
561,992
 512,802
Accumulated other comprehensive loss(31,788) (38,684)
Retained earnings 1
196,148
 201,343
Total stockholders’ equity631,172
 609,814
Total liabilities and stockholders’ equity$1,124,729

$1,010,228

1See Note 2 for discussion of the adoption of ASU 2016-09.

See accompanying notes to condensed consolidated financial statements.

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SYNCHRONOSS TECHNOLOGIES, INCINC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOMEOPERATIONS
(Unaudited)
(In thousands, except per share data)

Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Three Months Ended September 30, Nine Months Ended September 30,
2016 2015 2016 2015
Net revenues$176,421
 $150,874
 $476,658
 $421,620
Net revenues$76,535  $77,846  $153,657  $165,951  
Costs and expenses: 
  
  
  
Costs and expenses:
Cost of services*77,230
 63,438
 217,004
 172,013
Cost of revenues*Cost of revenues*29,480  33,403  64,951  72,356  
Research and development28,141
 23,986
 78,408
 68,472
Research and development19,096  19,026  38,884  38,707  
Selling, general and administrative31,600
 21,003
 89,799
 60,603
Selling, general and administrative24,640  23,080  50,984  52,326  
Net change in contingent consideration obligation572
 —
 7,299
 —
Restructuring charges977
 399
 5,139
 5,090
Restructuring charges4,493  356  5,943  777  
Depreciation and amortization24,692
 19,754
 74,009
 51,221
Depreciation and amortization10,284  20,269  21,640  40,412  
Total costs and expenses163,212

128,580

471,658

357,399
Total costs and expenses87,993  96,134  182,402  204,578  
Income from operations13,209
 22,294
 5,000
 64,221
Loss from continuing operationsLoss from continuing operations(11,458) (18,288) (28,745) (38,627) 
Interest income271
 546
 1,492
 1,483
Interest income1,509  299  1,568  488  
Interest expense(1,596) (1,448) (5,006) (4,208)Interest expense(84) (463) (329) (1,048) 
Other income (expense), net(167) (1,030) (186) (601)
Income before income tax expense11,717
 20,362
 1,300
 60,895
Income tax expense 1
(6,884) (10,717) (14,853) (25,535)
Net income (loss)4,833
 9,645
 (13,553) 35,360
Net loss attributable to noncontrolling interests(2,843) —
 (8,836) —
Net income (loss) attributable to Synchronoss$7,676
 $9,645
 $(4,717) $35,360
Gain (loss) on extinguishment of debtGain (loss) on extinguishment of debt—  430  —  817  
Other Income, netOther Income, net1,367  (24) 3,058  439  
Equity method investment lossEquity method investment loss—  (376) —  (1,619) 
Loss from continuing operations, before taxesLoss from continuing operations, before taxes(8,666) (18,422) (24,448) (39,550) 
Benefit for income taxesBenefit for income taxes7,972  1,844  20,404  3,235  
       
Net income (loss) per common share attributable to Synchronoss:  
  
  
Net lossNet loss(694) (16,578) (4,044) (36,315) 
Net loss attributable to redeemable noncontrolling interestsNet loss attributable to redeemable noncontrolling interests(165) (593) (182) (906) 
Preferred stock dividendPreferred stock dividend(9,289) (7,859) (18,197) (15,396) 
Net loss attributable to SynchronossNet loss attributable to Synchronoss$(10,148) $(25,030) $(22,423) $(52,617) 
Earnings per shareEarnings per share
Basic$0.18
 $0.23
 $(0.11) $0.84
Basic$(0.24) $(0.61) $(0.54) $(1.30) 
Diluted$0.16
 $0.21
 $(0.11) $0.77
Diluted$(0.24) $(0.61) $(0.54) $(1.30) 
Weighted-average common shares outstanding: 
  
  
  
Weighted-average common shares outstanding:
Basic43,560
 42,491
 43,488
 42,077
Basic41,697  40,810  41,482  40,566  
Diluted48,590
 47,692
 43,488
 47,505
Diluted41,697  40,810  41,482  40,566  
       
Comprehensive income attributable to Synchronoss$10,768
 $8,994
 $2,179
 $22,021

* Cost of servicesrevenues excludes depreciation and amortization which isare shown separately.

1See Note 2 for discussion of the adoption of ASU 2016-09.

See accompanying notes to condensed consolidated financial statements.







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SYNCHRONOSS TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(Unaudited) (In thousands)

Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Net loss$(694) $(16,578) $(4,044) $(36,315) 
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments1,872  802  (2,069) 507  
Unrealized loss on available for sale securities—  3  751  (902) 
Net income (loss) on inter-company foreign currency transactions554  264  182  (119) 
Total other comprehensive income (loss)2,426  1,069  (1,136) (514) 
Comprehensive loss1,732  (15,509) (5,180) (36,829) 
Comprehensive loss attributable to redeemable noncontrolling interests(165) (593) (182) (906) 
Comprehensive loss attributable to Synchronoss$1,567  $(16,102) $(5,362) $(37,735) 

See accompanying notes to condensed consolidated financial statements.
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SYNCHRONOSS TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited) (In thousands)

Three Months Ended June 30, 2020
Common StockTreasury StockAdditionalAccumulated OtherTotal
SharesAmountSharesAmountPaid-In CapitalComprehensive Income (Loss)Accumulated deficitStockholders' Equity
Balance at March 31, 202051,758  $5  (7,162) $(82,087) $522,164  $(36,823) $(338,454) $64,805  
Stock based compensation—  —  —  —  4,754  —  —  4,754  
Issuance of restricted stock(138) —  —  —  —  —  —  —  
Preferred stock dividends declared—  —  —  —  (8,454) —  —  (8,454) 
Amortization of preferred stock issuance costs—  —  —  —  (835) —  —  (835) 
Shares withheld for taxes in connection with issuance of restricted stock(1) —  —  —  —  —  —  —  
Net loss attributable to Synchronoss—  —  —  —  —  —  (694) (694) 
Non-controlling interest—  —  —  —  165  —  (165) —  
Total other comprehensive income (loss)—  —  —  —  —  2,426  —  2,426  
Balance at June 30, 202051,619  $5  (7,162) $(82,087) $517,794  $(34,397) $(339,313) $62,002  

Three Months Ended June 30, 2019
Common StockTreasury StockAdditionalAccumulated OtherTotal
SharesAmountSharesAmountPaid-In CapitalComprehensive Income (Loss)Accumulated deficitStockholders' Equity
Balance at March 31, 201949,908  $5  (7,162) $(82,087) $533,224  $(31,966) $(249,776) $169,400  
Stock based compensation—  —  —  —  5,329  —  —  5,329  
Issuance of restricted stock1,670  —  —  —  —  —  —  —  
Preferred stock dividends declared—  —  —  —  (7,331) —  —  (7,331) 
Amortization of preferred stock issuance costs—  —  —  —  (528) —  —  (528) 
Shares withheld for taxes in connection with issuance of restricted stock—  —  —  —  (5) —  —  (5) 
Net income attributable to Synchronoss—  —  —  —  —  —  (17,171) (17,171) 
Non-controlling interest—  —  —  —  593  —  —  593  
Total other comprehensive income (loss)—  —  —  —  —  1,069  —  1,069  
Balance at June 30, 201951,578  $5  (7,162) $(82,087) $531,282  $(30,897) $(266,947) $151,356  



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Six Months Ended June 30, 2020
Common StockTreasury StockAdditionalAccumulated OtherTotal
SharesAmountSharesAmountPaid-In CapitalComprehensive Income (Loss)Accumulated deficitStockholders' Equity
Balance at December 31, 201951,704  $5  (7,162) $(82,087) $525,739  $(33,261) $(334,319) $76,077  
Stock based compensation—  —  —  —  10,070  —  —  10,070  
Issuance of restricted stock(83) —  —  —  —  —  —  —  
Preferred stock dividends declared—  —  —  —  (16,612) —  —  (16,612) 
Amortization of preferred stock issuance costs—  —  —  —  (1,585) —  —  (1,585) 
Shares withheld for taxes in connection with issuance of restricted stock(2) —  —  —  —  —  —  —  
Net loss attributable to Synchronoss—  —  —  —  —  —  (4,044) (4,044) 
Non-controlling interest—  —  —  —  182  —  (182) —  
Total other comprehensive income (loss)—  —  —  —  —  (1,136) —  (1,136) 
Adoption of new credit loss accounting standard—  —  —  —  —  —  (768) (768) 
Balance at June 30, 202051,619  $5  (7,162) $(82,087) $517,794  $(34,397) $(339,313) $62,002  


Six Months Ended June 30, 2019
Common StockTreasury StockAdditionalAccumulated OtherTotal
SharesAmountSharesAmountPaid-In CapitalComprehensive Income (Loss)Accumulated deficitStockholders' Equity
Balance at December 31, 201849,836  $5  (7,162) $(82,087) $534,673  $(30,383) $(233,299) $188,909  
Stock based compensation—  —  —  —  11,108  —  —  11,108  
Issuance of restricted stock1,743  —  —  —  —  —  —  —  
Preferred stock dividends declared—  —  —  —  (14,406) —  —  (14,406) 
Amortization of preferred stock issuance costs—  —  —  (990) (990) 
Shares withheld for taxes in connection with issuance of restricted stock(1) —  —  —  (9) —  —  (9) 
ASC 842 Lease implementation Adjustments—  —  —  —  —  —  3,573  3,573  
Net income attributable to Synchronoss—  —  —  —  —  —  (37,221) (37,221) 
Non-controlling interest—  —  —  —  906  —  —  906  
Total other comprehensive income (loss)—  —  —  —  —  (514) —  (514) 
Balance at June 30, 201951,578  $5  (7,162) $(82,087) $531,282  $(30,897) $(266,947) $151,356  

See accompanying notes to condensed consolidated financial statements.

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SYNCHRONOSS TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In (In thousands)
Six Months Ended June 30,
20202019
Operating activities:
Net loss$(4,044) $(36,315) 
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization21,640  40,412  
Amortization of debt issuance costs—  237  
(Gain) loss on extinguishment of debt—  (817) 
Loss (earnings) from Equity method investments—  1,619  
(Gain) loss on Disposals of fixed assets12  —  
(Gain) loss on Disposals of intangible assets(2,164) —  
Amortization of bond premium—  (34) 
Deferred income taxes478  (702) 
Stock-based compensation10,156  11,028  
Changes in operating assets and liabilities:
Accounts receivable, net904  2,870  
Prepaid expenses and other current assets(10,031) 17,635  
Other assets502  2,042  
Accounts payable3,514  5,151  
Accrued expenses7,002  (9,569) 
Other liabilities(1,748) (1,826) 
Deferred revenues(24,613) (13,167) 
Net cash provided by (used in) operating activities1,608  18,564  
Investing activities:
Purchases of fixed assets(424) (4,940) 
Purchases of intangible assets and capitalized software(8,685) (5,959) 
Proceeds from the sale of intangibles2,164  —  
Purchases of marketable securities available for sale—  (37,542) 
Maturity of marketable securities available for sale11  28,191  
Net cash provided by (used in) investing activities(6,934) (20,250) 
Financing activities:
Taxes paid on withholding shares(9) —  
Retirement of Convertible Senior Notes & related costs—  (65,887) 
Borrowings on revolving line of credit10,000  —  
Preferred dividend payment—  (7,075) 
Payments on capital obligations—  (612) 
Net cash provided by (used in) financing activities9,991  (73,574) 
Effect of exchange rate changes on cash(895) 10  
Net increase in cash and cash equivalents3,770  (75,250) 
Cash and cash equivalents, beginning of period39,001  109,860  
Cash and cash equivalents, end of period$42,771  $34,610  
Supplemental disclosures of non-cash investing and financing activities:
Paid in kind dividends on Series A Convertible Participating Perpetual Preferred Stock$17,616  $7,332  
 Nine Months Ended September 30,
 2016 2015
Operating activities:  (As Adjusted)
Net (loss) income$(13,553) $35,360
Adjustments to reconcile net (loss) income to net cash provided by operating activities: 
  
Depreciation and amortization expense74,009
 51,221
Amortization of debt issuance costs1,197
 1,125
Loss on disposals(70) —
Amortization of bond premium1,214
 1,261
Deferred income taxes5,537
 (11,772)
Non-cash interest on leased facility763
 694
Stock-based compensation25,407
 21,234
Contingent consideration obligation7,299
 (1,532)
Changes in operating assets and liabilities: 
  
Accounts receivable, net of allowance for doubtful accounts(72,871) (40,442)
Prepaid expenses and other current assets 1
5,315
 8,020
Other assets4,558
 (670)
Accounts payable(5,679) 106
Accrued expenses 1
4,070
 10,497
Other liabilities(6,596) (138)
Deferred revenues25,884
 1,610
Net cash provided by operating activities56,484
 76,574
    
Investing activities: 
  
Purchases of fixed assets(46,189) (53,461)
Purchases of intangible assets—
 (1,200)
Purchases of marketable securities available-for-sale(12,841) (105,817)
Maturities of marketable securities available-for-sale76,979
 75,370
Businesses acquired, net of cash(98,428) (83,592)
Net cash used in investing activities(80,479) (168,700)
    
Financing activities: 
  
Proceeds from the exercise of stock options9,382
 16,752
Taxes paid on withholding shares 1
(7,176) (15,472)
Payments on contingent consideration obligation—
 (4,468)
Debt issuance costs related to convertible notes(1,346) —
Borrowings on revolving line of credit144,000
 —
Repayment of revolving line of credit(106,000) —
Repurchases of common stock(40,025) —
Proceeds from the sale of treasury stock in connection with an employee stock purchase plan2,183
 1,902
Repayments of capital lease obligations(2,933) (1,772)
Net cash used in financing activities(1,915) (3,058)
Effect of exchange rate changes on cash1,595
 2,569
Net decrease in cash and cash equivalents(24,315) (92,615)
Cash and cash equivalents at beginning of period147,634
 235,967
Cash and cash equivalents at end of period$123,319
 $143,352
    
Supplemental disclosures of cash flow information: 
  
Issuance of common stock in connection with Openwave acquisition$22,000
 $—
Cash paid for income taxes$3,935
 $24,052
Cash paid for interest$1,636
 $3,918

1See Note 2 for discussion of the adoption of ASU 2016-09.

 See accompanying notes to condensed consolidated financial statements.

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SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
(Amounts in tables in thousands, except for per share data or unless otherwise noted)



1. Description of Business

General

Synchronoss Technologies, Inc. (the(“Synchronoss” or the “Company” or “Synchronoss”) is a leading innovator of cloud solutions, software-based activation, secure mobility, identity managementDigital, Cloud, Messaging and secure messaging for mobile carriers, enterprises, retailers and OEMs across the globe. Synchronoss’ software provides innovative service provider and enterprise solutions that drive billions of transactions on a wide range of connected devices acrossIoT platforms help the world’s leading networks.companies, including operators, original equipment manufacturers (“OEMs”), and Technology, Media and Telecom (“TMT”) providers to deliver continuously transformative customer experiences that create high value engagement and new monetization opportunities.

The Company currently operates in and markets solutions and services directly through the Company’s sales organizations in North America, Europe and Asia-Pacific. The Company’s platforms give customers new opportunities in the TMT space, taking advantage of the rapidly converging services, connected devices, networks and applications.

The Company delivers platforms, products and solutions include: activation and provisioning software for devices and services, cloud-basedincluding:

•Cloud sync, backup, storage, device set up, content transfer and content engagement for user generated content
•Advanced, multi-channel messaging peer-to-peer (“P2P”) communications and application-to-person (“A2P”) commerce solutions
•Digital experience management capabilities, broadband connectivity solutions,(Platform as a Service) - including digital journey creation, and journey design products that use analytics white label messaging, identity/accessthat power digital advisor products for IT and Business Channel Owners
•IoT management technology for Smart Cities, Smart Buildings and secure mobility management that enable communications service providers (CSPs), cable operators/multi-services operators (MSOs) and original equipment manufacturers (OEMs) with embedded connectivity (e.g. smartphones, laptops, tablets and mobile Internet devices (MIDs), such as automobiles, wearables for personal health and wellness, and connected homes), multi-channel retailers, medium and large enterprises and their consumers as well as other customers to accelerate and monetize value-added services for secure and broadband networks and connected devices.more
Synchronoss’ Activation Software, Synchronoss Personal Cloud™ and Enterprise products and platforms provide end-to-end seamless integration between customer-facing channels/applications, communication services, or devices and “back-office” infrastructure-related systems and processes. The Company’s customers rely on the Company’s solutions and technology to automate the process of activation and content and settings management for their subscribers’ devices while delivering additional communication services.
The Synchronoss Activation solution navigates the variety of complex back-end systems of CSPs to provide a best-in-class ordering system by orchestrating the workflow and consolidated automated customer care services. This allows CSPs using the Company’s platforms to realize the full benefits of their offerings. The platforms also support, among other automated transaction areas, credit card billing, inventory management, and trouble ticketing. In addition to this, the platform supports customer activation related transactions and other services which include managing access service requests, local service requests, local number portability, and directory listings.

The Synchronoss Personal Cloud™ solutionCloud Platform™ is a secure and highly scalable white label platform designed to store and sync subscriber’s personally created content seamlessly transfers contentto and from an old device to acurrent and new device, syncs, backs up and connects consumer’s content from multiple smart devices to the Company’s cloud platform.devices. This allows carrieran Operator’s customers to protect, engage with and manage their growing cachepersonal content and gives the Company’s Operator customers the ability to increase average revenue per user (“ARPU”) through a new monthly recurring charge (“MRC”) and opportunities to mine valuable data that will give subscribers access to new, beneficial services. Additionally, the Synchronoss Personal Cloud Platform performs an expanding set of personally generated, mobile content over long periods of time.value-add services including facilitating an Operator’s initial device setup and enhancing visibility and control across disparate devices within subscribers’ smart homes.

The Synchronoss Enterprise solutions support an advanced mobility digital experience for accessing and protecting business and consumer information.Messaging Platform powers hundreds of millions of subscribers’ mail boxes worldwide. The Company’s identityAdvanced Messaging Product is a powerful, secure and access management platform helps users to securely authenticate access to online websites to conduct e-commerce transactions or access important data. This allows the Company’s platforms to help reduce fraud, improve cybersecurity detection/prevention and overall productivity. The identity and access solution supports both consumers by allowing them to self-register and verify their identity, while providing non-intrusive multi-factor authentication and businesses the ability to be sure the correct person is doing the transaction.  The secure mobility platforms help users safely and securely store and share important data. The solutions are based on understanding assumptions on the behaviors of individuals through the capture of who they are, what they are doing and how, where and when they are doing it.  The secure mobility solution combines the identity platform with a “bring your own device” (BYOD) platform that is based on a secure container for accessing data, applications, content and personal information management tools like email, calendar, messaging and notes.
Synchronoss Messaging is aintelligent white label messaging platform that expands capabilities for service providersOperators and offersTMT companies to offer P2P messaging via Rich Communications Services (“RCS”). Additionally, the Company’s Advanced Messaging Product powers commerce and a full rangerobust ecosystem for Operators, brands and advertisers to execute Application to Person (“A2P”) commerce and data-rich dialogue with subscribers.

The Synchronoss Digital Experience Platform (“DXP”) is a purpose-built experience management toolset that sits between the Company’s customers end-user facing applications and their existing back end systems, enabling the authoring and management of deployment options. Thecustomer journeys in a cloud-native no/low-code environment. This platform uses products such as Journey Creator, Journey Advisor, CX Baseline and Digital Coach to create a wide variety of insight-driven customer experiences across existing channels (digital and analogue) including creating the ability to pause and resume continuous, intelligent experiences in an omni-channel environment. DXP can be deployed fully integratedoperated by IT professionals and “citizen” developers (business analysts, etc.) enabling the Company’s customers to bring more compelling and complex experiences to market in less time with on premise systems, through hybrid deployment support,fewer and more diverse resources in a real-time, collaborative environment.

The Synchronoss IoT Platform creates an easy to use environment and extensible ecosystem making the management of disparate devices, sensors, data pools and networks easier to manage by IoT administrators and drives the propagation of new IoT applications and monetization models for an optimal mix of technologiesTMT companies. The Company’s IoT platform utilizes Synchronoss platforms (DXP, Cloud, Messaging), products and existing investments,solutions to make IoT more accessible and full cloud deploymentactionable for both SaaSSmart Building facility managers, Smart City planners, Automotive OEMs and hosted models. Synchronoss Messaging features a distributed systems management console (messaging security, administration console for user and domain provisioning and management, integration with Nagios for monitoring and alerts) with support for smartphones, tablets and connected devices (support for leading protocols including iCal, CalDAV, CardDAV, EAS, IMAP/IDLE), Native Mobile App for iOS and Android for mail, contacts, calendar and task management.TMT ecosystem players.




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SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
(Amounts in tables in thousands, except for per share data or unless otherwise noted)


Synchronoss’ products and platforms are designed to be carrier-grade, highly available, flexible and scalable to enable multiple converged communication services to be managed across multiple distribution channels including e-commerce, m-commerce, telesales, customer stores, indirect and other retail outlets. Synchronoss' offerings allow it to meet the rapidly changing and converging services and connected devices offered by the Company’s customers. The Company’s products, platforms and solutions enable its Enterprise customers to acquire, retain and service subscribers quickly, reliably and cost-effectively with white label and custom-branded solutions.  Customers can simplify the processes associated with managing the customer experience for procuring, activating, connecting, backing-up, synchronizing and enterprise-wide sharing/collaboration with connected devices and contents from these devices and associated services.  The extensibility, scalability, reliability and relevance of the Company’s platforms enable new revenue streams and retention opportunities for the Company’s customers through new subscriber acquisitions, sale of new devices, accessories and new value-added service offerings in the Cloud, while optimizing their cost of operations and enhancing customer experience. Synchronoss currently operates in and markets its solutions and services directly through its sales organizations in North America, Europe and Asia-Pacific.
2. Basis of Presentation and Consolidation

Basis of Presentation and Consolidation

The accompanying interim unaudited condensed consolidated financial statements as of September 30, 2016have been prepared by Synchronoss and for the three and nine months ended September 30, 2016 are unaudited, but in the opinion of management, include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the Company’s financial position, results of operations and cash flows for the interim periods. They do not include all of the information and footnotes required by U.S. generally accepted accounting principles (“GAAP”) for complete financial statements and should be read in conjunction with the Company’s audited consolidated financial statements and related notes included in the Company’s Annual Report of Synchronoss Technologies, Inc. incorporated by reference in the Company's annual report on Form 10-K for the year ended December 31, 2015. 2019. The results of operations for the three and six months ended June 30, 2020 are not necessarily indicative of the results to be expected for the year ending December 31, 2020.

The condensed consolidated financial statements include the accounts of the Company, its wholly‑ownedwholly-owned subsidiaries and variable interest entities (VIE)(“VIE”) in which the Company is the primary beneficiary and entities in which the Company has a controlling interest. TheInvestments in less than majority-owned companies in which the Company has no unconsolidated subsidiaries or investmentsdoes not have a controlling interest, but does have significant influence, are accounted for underas equity method investments. Investments in less than majority-owned companies in which the equityCompany does not have the ability to exert significant influence over the operating and financial policies of the investee are accounted for using the cost method. All material intercompany transactions and accounts are eliminated in consolidation. The results reported in these consolidated financial statements should not necessarily be taken as indicative of results that may be expected for the entire year. Certain amounts from the prior year’s financial statementsyear amounts have been reclassified to conform to the current year’syear's presentation.

For further information about the Company’s basis of presentation and consolidation or its significant accounting policies, refer to the consolidated financial statements and footnotes thereto included in the Company’s annual reportAnnual Report on Form 10-K for the year ended December 31, 2015.2019.

Recently Issued Accounting StandardsRisks and Uncertainties

In August 2016,There are many uncertainties regarding the Financial Account Standards Board (“FASB”current coronavirus ("COVID-19") issued Accounting Standards Update (“ASU”) 2016-15, “Statement of Cash Flows” (“ASU 2016-15). This new guidance will make eight targeted changes to how cash receiptspandemic, and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for fiscal years beginning after December 15, 2017. ASU 2016-15 will require adoption on a retrospective basis unless it is impracticable to apply, in which case the Company would be required to apply the amendments prospectively as of the earliest date practicable. The Company is currently evaluatingclosely monitoring the impact of ASU 2016-15the pandemic on all aspects of its business, including how it will impact its customers, employees, suppliers, vendors, business partners and distribution channels. While the condensed consolidatedpandemic did not materially affect the Company’s financial statements.

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers,” which requires an entity to recognize the amount of revenue to which it expects to be entitledresults and business operations for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. In March 2016,three and six months ended June 30, 2020, the FASB issued ASU 2016-08, “Principal versus Agent Considerations (Reporting Revenue Gross versus Net),” which clarifies the guidance in determining revenue recognition as principal versus agent. In April 2016, the FASB issued ASU 2016-10, “Identifying Performance Obligations and Licensing,” which provides guidance in accounting for immaterial performance obligations and shipping and handling. In May 2016, the FASB issued ASU 2016-12, “Narrow-Scope Improvements and Practical Expedients” which provides clarification on assessing the collectability criterion, presentation of sales taxes, measurement date for non-cash consideration and completed contracts at transition. This ASU also provides a practical expedient for contract modifications. The new standards are effective for public reporting companies for interim and annual periods beginning after December 15, 2017. The Company is currently evaluatingunable to predict the effectimpact that these ASUsCOVID-19 will have on its condensed consolidated financial statementsposition and related disclosures.operating results due to numerous uncertainties. The Company has not yet selected a transition method nor has it determinedwill continue to assess the full effectevolving impact of these standards onthe COVID-19 pandemic and will make adjustments to its ongoing financial reporting.operations as necessary.



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SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
(Amounts in tables in thousands, except for per share data or unless otherwise noted)


Impact of New Accounting Pronouncements
In March, 2016, the FASB releasedRecently Issued Accounting Standards Update (“ASU”) 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.”

Recent accounting pronouncements adopted

StandardDescriptionEffect on the financial statements
ASU 2016-13, ASU 2019-4 Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial InstrumentsIn June 2016, the FASB issued ASU 2016-13 which replaces the incurred loss impairment methodology in current U.S. GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The ASU is effective for public companies in annual periods beginning after December 15, 2019, and interim periods within those years. Early adoption is permitted beginning after December 15, 2018 and interim periods within those years.We adopted Topic 326 beginning on January 1, 2020 using the modified retrospective approach with a cumulative effect adjustment to opening retained earnings recorded at the beginning of the period of adoption. Upon adoption, we changed our impairment model to utilize a forward-looking current expected credit losses (CECL) model in place of the incurred loss methodology for financial instruments measured at amortized cost, including our accounts receivable. CECL estimates on accounts receivable are recorded as general and administrative expenses on our condensed consolidated statements of income. The cumulative effect adjustment from adoption was immaterial to our condensed consolidated financial statements.
Date of adoption: January 1, 2020.

Standards issued not yet adopted

StandardDescriptionEffect on the financial statements
Update 2019-12 - Income Taxes (Topic 740) Simplifying the Accounting for Income TaxesThe ASU removes the exception to the general principles in ASC 740, Income Taxes, associated with the incremental approach for intra-period tax allocation, accounting for basis differences when there are ownership changes in foreign investments and interim-period income tax accounting for year-to-date losses that exceed anticipated losses. In addition, the ASU improves the application of income tax related guidance and simplifies U.S. GAAP when accounting for franchise taxes that are partially based on income, transactions with government resulting in a step-up in tax basis goodwill, separate financial statements of legal entities not subject to tax, and enacted changes in tax laws in interim periods. Different transition approaches, retrospective, modified retrospective, or prospective, will apply to each income tax simplification provision.
The Company is still evaluating these changes and does not anticipate any material impact on the Company’s consolidated financial position or results of operations upon adoption.

Date of adoption: January 1, 2021.


3. Revenue

Disaggregation of revenue

The ASU includes multiple provisions intended to simplify various aspectsCompany disaggregates revenue from contracts with customers into the nature of the accounting for share-based payments. While aimed at reducingproducts and services and geographical regions. The Company’s geographic regions are the costAmericas, Europe, the Middle East and complexityAfrica (“EMEA”), and Asia Pacific (“APAC”). The majority of the accounting for share-based payments, the amendments may significantly impact net income, earnings per share, and the statement of cash flows. The ASUCompany’s revenue is effective for public companies in annual periods beginning after December 15, 2016, and interim periods within those years. The Company elected to early adopt this standard in the second quarter ended June 30, 2016.  
ASU 2016-09 eliminates the requirement to estimate and apply a forfeiture rate to reduce stock compensation expense during the vesting period and, instead, account for forfeitures as they occur. ASU 2016-09 requires that this change be adopted using the modified retrospective approach. As such, the Company recorded a cumulative-effect adjustment of $1.0 million to adjust retained earnings.
Under ASU 2016-09, excess tax benefits related to employee share-based payments are not reclassified from operating activities to financing activities in the statement of cash flows. The Company applied the effect of ASU 2016-09 to the presentation of excess tax benefits in the statement of cash flows, retrospectively. This change increased the net cash provided by operating activities and decreased net cash provided by financing activities by $4.7 million for the nine months ended September 30, 2015.
Under ASU 2016-09, cash paid when withholding shares for tax withholding purposes are classified as a financing activity in the statement of cash flows. ASU 2016-09 requires that this change be adopted retrospectively. The presentation requirements for cash flows related to employee taxes paid for withheld shares increased the net cash provided by operating activities and decreased net cash provided by financing activities by $15.5 million for the nine months ended September 30, 2015.
ASU 2016-09 eliminates additional paid in capital ("APIC") pools and requires excess tax benefits and tax deficiencies to be recorded in the income statement when the awards vest or are settled. This decreased the effective tax rate for the three months ended September 30, 2016 by 2% and increased the effective tax rate by 51% for the nine months ended September 30, 2016. The ASU requires that this change be adopted prospectively. The Company excluded the excess tax benefits from the assumed proceeds available to repurchase shares in the computation of diluted earnings per share for the three months ended September 30, 2016. This increased the diluted weighted average common shares outstanding by 43,762 shares for the three months ended September 30, 2016Technology, Media and decreased the diluted weighted average common shares outstanding by 121,041 for the nine months ended September 30, 2016.
ASU 2016-09 eliminates the requirement that excess tax benefits be realized (i.e., through a reduction in income taxes payable) before they can be recognized. Previously unrecognized deferred tax assets were recognized on a modified retrospective basis which resulted in a cumulative-effect adjustment to retained earnings of $0.5 million.
Adoption of the new standard impacted previously reported quarterly results as follows:Telecom (collectively, “TMT”) sector.
11
 Three Months Ended March 31, 2016,
 As reported As adjusted
Income statement: 
  
Provision for income taxes$(3,965) $(4,588)
Cash flows statement: 
  
Net cash from operations$37,731
 $40,489
Net cash used in financing(35,253) (32,495)
Balance sheet: 
  
Deferred tax liability$23,096
 $22,864
Additional paid-in capital535,326
 536,659
Retained earnings194,012
 192,911


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SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
(Amounts in tables in thousands, except for per share data or unless otherwise noted)


Three Months Ended June 30, 2020Three Months Ended June 30, 2019
CloudDigitalMessagingTotalCloudDigitalMessagingTotal
Geography
Americas$40,761  $12,637  $8,500  $61,898  $38,582  $20,508  $2,281  $61,371  
APAC—  1,019  6,708  7,727  —  1,157  8,785  9,942  
EMEA1,686  1,347  3,877  6,910  1,849  561  4,123  6,533  
Total$42,447  $15,003  $19,085  $76,535  $40,431  $22,226  $15,189  $77,846  
Service Line
Professional Services$4,984  $2,736  $5,972  $13,692  $3,641  $3,989  $4,881  $12,511  
Transaction Services1,474  2,215  —  3,689  1,521  1,144  —  2,665  
Subscription Services35,989  9,251  11,112  56,352  35,199  16,137  8,557  59,893  
License—  801  2,001  2,802  70  956  1,751  2,777  
Total$42,447  $15,003  $19,085  $76,535  $40,431  $22,226  $15,189  $77,846  



Six Months Ended June 30, 2020Six Months Ended June 30, 2019
CloudDigitalMessagingTotalCloudDigitalMessagingTotal
Geography
Americas$80,083  $23,574  $19,403  $123,060  $77,496  $41,272  $4,350  $123,118  
APAC—  1,577  15,883  17,460  —  2,155  26,940  29,095  
EMEA3,408  2,604  7,125  13,137  3,645  1,650  8,443  13,738  
Total$83,491  $27,755  $42,411  $153,657  $81,141  $45,077  $39,733  $165,951  
Service Line
Professional Services$9,145  $7,272  $11,202  $27,619  $7,359  $8,292  $17,368  $33,019  
Transaction Services2,781  3,289  —  6,070  2,883  3,160  —  6,043  
Subscription Services71,565  16,253  21,729  109,547  70,793  32,539  17,722  121,054  
License—  941  9,480  10,421  106  1,086  4,643  5,835  
Total$83,491  $27,755  $42,411  $153,657  $81,141  $45,077  $39,733  $165,951  

Trade Accounts Receivable and Contract balances

The Company adopted ASU 2015-03, “Interest- Imputationclassifies its right to consideration in exchange for deliverables as either a receivable or a contract asset. A receivable is a right to consideration that is unconditional (i.e. only the passage of Interest (subtopic 835-30); Simplifying the Presentation of Debt Issuance Costs, and ASU 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line of Credit Arrangements, during the first quarter of 2016, concurrently. The adoption of these ASUstime is required before payment is due). For example, the Company recognizes a receivable for revenues related to reclassify its deferred financing costs associated withtime and materials and transaction or volume-based contracts. The Company presents such receivables in Trade accounts receivable, net in its Convertible Senior Notes fromcondensed consolidated statements of financial position at their net estimated realizable value. The Company maintains an allowance for credit losses to provide for the estimated amount of receivables that may not be collected. The allowance is based upon an assessment of customer creditworthiness, historical payment experience, the age of outstanding receivables and other assetseconomic indicators.

A contract asset is a right to long-term debtconsideration that is conditional upon factors other than the passage of time. For example, the Company would record a contract asset if it records revenue on a retrospective basis. The Company's consolidatedprofessional services engagement but are not entitled to bill until the Company achieves specified milestones. Contract assets balance sheets included deferred financing costs of $4.1 million and $5.1 million as of Septemberat June 30, 2016 and December 31, 2015, respectively, which were reclassified from other assets to long-term debt. The debt issuance costs associated with the Company's Credit Facility and Amended Credit Facility continue to be presented in other assets on the condensed consolidated balance sheets. 2020 is $12.8 million.

3. Earnings per Common Share
Basic earnings per share is calculated by using the weighted-average number of common shares outstanding during the period, excluding amounts associated with restricted shares.
The diluted earnings per share calculation is based on the weighted-average number of shares of common stock outstanding adjusted for the number of additional shares that would have been outstanding had all potentially dilutive common shares been issued.
Potentially dilutive shares of common stock include stock options, convertible debt and unvested restricted stock. The dilutive effects of stock options and restricted stock awards are based on the treasury stock method. The dilutive effect of the assumed conversion of convertible debt is determined using the if-converted method. The after-tax effect of interest expense related to the convertible securities is added back to net income (loss), and the convertible debt is assumed to have been converted into common shares at the beginning of the period.

The following table provides a reconciliation of the numerator and denominator used in computing basic and diluted net income (loss) attributable to common stockholders per common share.
12
 Three Months Ended September 30, Nine Months Ended September 30,
 2016 2015 2016 2015
Numerator: 
  
  
  
Net income (loss) attributable to Synchronoss$7,676
 $9,645
 $(4,717) $35,360
Income effect for interest on convertible debt, net of tax323
 377
 —
 1,366
Numerator for diluted EPS- Income to common stockholders after assumed conversions$7,999
 $10,022
 $(4,717) $36,726
Denominator: 
  
  
  
Weighted average common shares outstanding — basic43,560
 42,491
 43,488
 42,077
Dilutive effect of: 
  
  
  
Shares from assumed conversion of convertible debt4,326
 4,326
 —
 4,326
Options and unvested restricted shares704
 875
 —
 1,102
Weighted average common shares outstanding — diluted48,590
 47,692
 43,488
 47,505
        
Anti-dilutive stock options excluded:1,084
 745
 —
 434



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SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
(Amounts in tables in thousands, except for per share data or unless otherwise noted)


Amounts collected in advance of services being provided are accounted for as contract liabilities, which are presented as deferred revenue on the accompanying Condensed Consolidated Balance Sheets and are realized with the associated revenue recognized under the contract. Nearly all of the Company's contract liabilities balance is related to services revenue, primarily subscription services contracts.

The Company’s contract assets and liabilities are reported in a net position on a customer basis at the end of each reporting period.

Significant changes in the contract liabilities balance (current and noncurrent) during the period are as follows (in thousands):
Contract Liabilities*
Balance - January 1, 2020$87,799 
Revenue recognized in the period(149,666)
Amounts billed but not recognized as revenue125,140 
Balance - June 30, 2020$63,273 

* Comprised of Deferred Revenue

Transaction price allocated to the remaining performance obligations

Topic 606 requires that the Company disclose the aggregate amount of transaction price that is allocated to performance obligations that have not yet been satisfied as of June 30, 2020. The Company has elected not to disclose transaction price allocated to remaining performance obligations for:

1.Contracts with an original duration of one year or less, including contracts that can be terminated for convenience without a substantive penalty;
2.Contracts for which the Company recognizes revenues based on the right to invoice for services performed;
3.Variable consideration allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied promise to transfer a distinct good or service that forms part of a single performance obligation in accordance with Topic 606 Section 10-25-14(b), for which the criteria in Topic 606 Section 10-32-40 have been met. This applies to a limited number of situations where the Company is dependent upon data from a third party or where fees are highly variable.

Many of the Company’s performance obligations meet one or more of these exemptions. Specifically, the Company has excluded the following from the Company’s remaining performance obligations, all of which will be resolved in the period in which amounts are known:
•consideration for future transactions, above any contractual minimums
•consideration for success-based transactions contingent on third party data
•credits for failure to meet future service level requirements

As of June 30, 2020, the aggregate amount of transaction price allocated to remaining performance obligations, other than those meeting the exclusion criteria above, was $140.6 million, of which approximately 85.2 percent is expected to be recognized as revenues within 2 years, and the remainder thereafter.

Estimates of revenue expected to be recognized in future periods also exclude unexercised customer options to purchase services that do not represent material rights to the customer. Customer options that do not represent a material right are only accounted for in accordance with Topic 606 when the customer exercises its option to purchase additional goods or services.



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SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
(Amounts in tables in thousands, except for per share data or unless otherwise noted)

4. Fair Value Measurements of Assets and Liabilities

The Company classifies marketable securities as available-for-sale.  TheIn accordance with accounting principles generally accepted in the United States, fair value hierarchy establishedis defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the guidance adopted by the Companymeasurement date. A three-level hierarchy prioritizes the inputs used in valuation techniques into three levelsto measure fair value as follows:

•Level 1 –- Observable inputs –- quoted prices in active markets for identical assets and liabilities;
•Level 2 –- Observable inputs – other than the quoted prices in active markets for identical assets and liabilities – includes quoted prices for similar instruments, quoted prices for identical or similar instruments in inactive markets, and amounts derived from valuation models where all significant inputs are observable in active markets; and
•Level 3 –- Unobservable inputs –- includes amounts derived from valuation models where one or more significant inputs are unobservable and require the Company to develop relevant assumptions.

The following is a summary of assets, liabilities and redeemable noncontrolling interestinterests and their related classifications under the fair value hierarchy:
June 30, 2020
Total(Level 1)(Level 2)(Level 3)
Assets
Cash, cash equivalents and restricted cash (1)
$42,771  $42,771  $—  $—  
Total assets$42,771  $42,771  $—  $—  
Temporary equity
Redeemable noncontrolling interests (3)
$12,500  $—  $—  $12,500  
Total temporary equity$12,500  $—  $—  $12,500  
 September 30, 2016
 Total (Level 1) (Level 2) (Level 3)
Assets       
Cash and cash equivalents (A)$123,319
 $123,319
 $—
 $—
Securities available-for-sale (B)20,941
 —
 20,941
 —
Total assets$144,260
 $123,319
 $20,941
 $—
Liabilities 
  
  
  
Contingent consideration obligation$8,229
 $—
 $—
 $8,229
Total liabilities$8,229

$—

$—

$8,229
Temporary Equity 
  
  
  
Redeemable noncontrolling interest (C)$52,616
 $—
 $—
 $52,616
Total temporary equity$52,616

$—

$—

$52,616


December 31, 2019
Total(Level 1)(Level 2)(Level 3)
Assets
Cash, cash equivalents and restricted cash (1)
$39,001  $39,001  $—  $—  
Marketable securities-short term (2)
11  —  11  —  
Total assets$39,012  $39,001  $11  $—  
Temporary Equity
Redeemable noncontrolling interests (3)
$12,500  $—  $—  $12,500  
Total temporary equity$12,500  $—  $—  $12,500  

(1)Cash equivalents primarily included money market funds.
 December 31, 2015
 Total (Level 1) (Level 2) (Level 3)
Assets       
Cash and cash equivalents (A)$147,634
 $147,634
 $—
 $—
Securities available-for-sale (B)85,992
 —
 85,992
 —
Total assets$233,626
 $147,634
 $85,992
 $—
Liabilities 
  
  
  
Contingent consideration obligation$930
 $—
 $—
 $930
Total liabilities$930

$—

$—

$930
Temporary Equity 
  
  
  
Redeemable noncontrolling interest$61,452
 $—
 $—
 $61,452
Total temporary equity$61,452

$—

$—

$61,452
(A)Cash and cash equivalents includes money market funds.
(B)Securities available-for-sale include municipal bonds, commercial papers, certificates of deposit, enhanced income money market fund and corporate bonds which are classified as marketable securities.
(C)As of September 30, 2016, the carrying amount of the redeemable noncontrolling interest was greater than the fair value and accordingly no adjustment to the fair value was recorded.

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SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
(Amounts in tables in thousands, except for per share data or unless otherwise noted)

The Company utilizes the market approach to measure fair value for its financial assets. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets. The Company's marketable securities investments classified as Level 2 primarily utilize broker quotes in a non-active market for valuation of these securities. No transfers of assets between Level 1, Level 2 and Level 3 of the fair value measurement hierarchy occurred during the nine months ended September 30, 2016.
Available-for-Sale Securities
At September 30, 2016 and December 31, 2015, the estimated fair value of investments classified as available for sale, are as follows: 
 September 30, 2016
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
Available-for-sale securities:       
Certificates of deposit$450
 $1
 $—
 $451
Corporate bonds3,032
 —
 (31) 3,001
Municipal bonds17,513
 1
 (25) 17,489
Total available-for-sale securities$20,995

$2

$(56)
$20,941
 December 31, 2015
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
Available-for-sale securities:       
Certificates of deposit$2,329
 $—
 $(5) $2,324
Corporate bonds39,986
 —
 (253) 39,733
Municipal bonds38,564
 11
 (44) 38,531
Fixed Income Fund5,593
 —
 (189) 5,404
Total available-for-sale securities$86,472

$11

$(491)
$85,992
Unrealized gains and losses are reported as a component of accumulated other comprehensive income (loss) in stockholders' equity. The cost of securities sold is based on the specific identification method. The Company evaluates investments with unrealized losses to determine if the losses are other than temporary. The Company has determined that the gross unrealized losses as of September 30, 2016 and December 31, 2015 are temporary. In making this determination, the Company considered the financial condition, credit ratings and near-term prospects of the issuers, the underlying collateral of the investments, and the magnitude of the losses as compared to the cost and the length of time the investments have been in an unrealized loss position. Additionally, while the Company classifies the securities as available-for-sale, the Company does not currently intend to sell such investments and it is more likely than not to recover the carrying value prior to being required to sell such investments.

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SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
(Amounts in tables in thousands, except for per share data or unless otherwise noted)

The unrealized losses and fair values of available-for-sale securities that have been in an unrealized loss position for a period of less than and greater than 12 months as of September 30, 2016, are as follows: 
 September 30, 2016
 
Securities in unrealized loss position
less than 12 months
 
Securities in unrealized loss position
greater than 12 months
 Total
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
Corporate bonds$(31) $3,001
 $—
 $—
 $(31) $3,001
Municipal bonds(13) 15,585
 (1) 689
 (14) 16,274
 $(44)
$18,586

$(1)
$689

$(45)
$19,275

The unrealized losses and fair values of available-for-sale securities that have been in an unrealized loss position for a period of less than and greater than 12 months as of December 31, 2015, are as follows: 
 December 31, 2015
 
Securities in unrealized loss position
less than 12 months
 
Securities in unrealized loss position
greater than 12 months
 Total
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
Certificates of deposit$(5) $2,324
 —
 $—
 $(5) $2,324
Corporate bonds(253) 39,808
 —
 —
 (253) 39,808
Municipal bonds(43) 20,630
 (1) 550
 (44) 21,180
Fixed Income Fund—
 —
 (189) 5,404
 (189) 5,404
 $(301)
$62,762

$(190)
$5,954

$(491) $68,716
Expected maturities of available-for-sale(2)Marketable securities are as follows: comprised of municipal bonds, certificates of deposit. corporate bonds, treasury bonds, and mutual funds.
 September 30, 2016
 
Amortized
Cost
 
Fair
Value
Due within one year$17,019
 $16,973
Due after 1 year through 5 years3,976
 3,968
Total available-for-sale securities$20,995
 $20,941
Contingent Consideration
The Company determined(3)Put arrangements held by the fair value of the contingent consideration related to the acquisition of Razorsight using a real options approach which uses a risk-adjusted expected growth rate based on assessments of expected growthnoncontrolling interests in revenue, adjusted by an appropriate factor. The fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement. The significant unobservable inputs used in the fair value measurementcertain of the Company’s contingent consideration obligation are the probabilities of achieving certain financial targets and contractual milestones. Significant changes in any of those probabilities in isolation may result in a higher (lower) fair value measurement. joint ventures.

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SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
(Amounts in tables in thousands, except for per share data or unless otherwise noted)

The changes in fair value of the Company’s Level 3 contingent consideration obligation during the nine months ended September 30, 2016 were as follows: 
Balance at December 31, 2015$930
Fair value adjustment to contingent consideration obligation included in net loss7,299
Balance at September 30, 2016$8,229

Redeemable Noncontrolling Interests

The Company accounts for the redeemable noncontrolling interestinterests recorded at its fair value as temporary equity, due toare put arrangements held by the redemption option existing outside the controlnoncontrolling interests in certain of the Company. The noncontrolling shareholders have the option, which is embedded in the noncontrolling interest, to require the Company to purchase the remaining noncontrolling share at a formula price designed to approximate fair value based on operating results of the entity.
Company’s joint ventures. The Company recognizes changes in the redemption value immediately as they occur and adjusts the carrying value of the noncontrolling interest to the greater of the estimated redemption value, which approximates fair value, at the end of each reporting period or the initial carrying amount. As of September 30, 2016, the carrying amount of the redeemable noncontrolling interest was greater than the fair value and accordingly no adjustment to the fair value was recorded.

The fair value of the redeemable noncontrolling interestinterests was estimated by applying an income approach using a discounted cash flow analysis. This fair value measurement is based on significant inputs that are not observable in the market and thus represents a Level 3 measurement. Significant changes in the underlying assumptions used to value the redeemable noncontrolling interest could significantly increase or decrease the fair value estimates recorded in the condensed consolidated balance sheets.
The changes in fair value of the Company’s Level 3 redeemable noncontrolling interests during the nine months ended September 30, 2016 were as follows:
14
Balance at December 31, 2015$61,452
Fair value adjustment—
Net loss attributable to redeemable noncontrolling interests(8,836)
Balance at September 30, 2016$52,616
5. Acquisition
Openwave Messaging, Inc. (“Openwave”)
On March 1, 2016, the Company acquired all outstanding shares of Openwave for $124.5 million, net of working capital adjustments and liabilities assumed, comprised of $102.5 million paid in cash and $22.0 million paid in shares of the Company’s common stock, based upon the average market value of the common stock for the ten trading days prior to the acquisition date.
Openwave’s product portfolio includes its core complete messaging platform optimized for today’s most complex messaging requirements worldwide with a particular geographic strength in Asia-Pacific. With this acquisition and combined with Synchronoss’ current global footprint, Synchronoss will have increased direct access to subscribers around the world for the Synchronoss Personal Cloud™ platform and bolster the Company’s go-to-market efforts internationally.

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SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
(Amounts in tables in thousands, except for per share data or unless otherwise noted)


noncontrolling interests could significantly increase or decrease the fair value estimates recorded in the Condensed Consolidated Balance Sheets.

The changes in fair value of the Company’s Level 3 redeemable noncontrolling interests during the six months ended June 30, 2020 were as follows:

Balance at December 31, 2019$12,500 
Fair value adjustment(182)
Net income attributable to redeemable noncontrolling interests182 
Balance at June 30, 2020$12,500 

5. Leases

The Company has entered into contracts with third parties to lease a variety of assets, including certain real estate, equipment, automobiles and other assets. The Company’s leases frequently allow for lease payments that could vary based on factors such as inflation or the degree of utilization of the underlying asset. For example, certain of the Company’s real estate leases could require us to make payments that vary based on common area maintenance charges, insurance and other charges. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The Company is party to certain sublease arrangements, primarily related to the Company’s real estate leases, where it acts as the lessee and intermediate lessor.

The Company reflects finance leases as a component of Leases, non-current on the Condensed Consolidated Balance Sheet. The finance leases were not material for the period ended June 30, 2020.

The following table presents information about the Company's Right of Use (ROU) assets and lease liabilities at June 30, 2020 (in thousands):
ROU assets:
Non-current operating lease ROU assets$46,913 
Operating lease liabilities:
Current operating lease liabilities*$9,527 
Non-current operating lease liabilities53,452 
Total operating lease liabilities$62,979 

* Amounts are included in Accrued Expenses on the Condensed Consolidated Balance Sheet.

The following table presents information about lease expense and sublease income for the three and six months ended June 30, 2020 (in thousands):
Three Months EndedSix Months Ended
June 30, 2020June 30, 2020
Operating lease cost*$3,170  $6,220  
Other lease costs and income:
Variable lease costs*1,402  1,727  
Sublease income*(978) (1,944) 
Total net lease cost$3,594  $6,003  

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
(Amounts in tables in thousands, except for per share data or unless otherwise noted)

* Amounts are included in Cost of revenues, Selling, general and administrative and/or Research and development based on the function that the underlying leased asset supports which are reflected in the Condensed Consolidated Statements of Operations.

The following table provides the undiscounted amount of future cash flows included in our lease liabilities at June 30, 2020 for each of the five years subsequent to December 31, 2019 and thereafter, as well as a reconciliation of such undiscounted cash flows to our lease liabilities at June 30, 2020 (in thousands):
Operating Leases
Remaining 2020$6,743  
202112,754  
202212,105  
20239,667  
20249,470  
Thereafter32,305  
Total future lease payments83,044  
Less: amount representing interest(20,065) 
Present value of future lease payments (lease liability)$62,979  

The following table provides the weighted-average remaining lease term and weighted-average discount rates for our leases as of June 30, 2020:

Operating Leases:
Weighted-average remaining lease term (years), weighted based on lease liability balances7.19
Weighted-average discount rate (percentages), weighted based on the remaining balance of lease payments8.0 %

The following table provides certain cash flow and supplemental noncash information related to our lease liabilities for the six months ended June 30, 2020 (in thousands):

Operating Leases:
Cash paid for amounts included in the measurement of lease liabilities$6,638 
Lease liabilities arising from obtaining right-of-use assets1,266 

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
(Amounts in tables in thousands, except for per share data or unless otherwise noted)


6. Investments in Affiliates and Related Transactions

Sequential Technology International, LLC

In connection with the divestiture of the exception handling business of the Company in 2017, Synchronoss entered into a three-year Cloud Telephony and Support services agreement (“CTS Agreement”) to grant Sequential Technology International, LLC (“STIN”) access to certain Synchronoss software and private branch exchange systems to facilitate exception handling operations required to support STIN customers.

The CTS agreement expired in the first quarter of 2020. At the time of the expiration, the Company entered into an Asset Purchase Agreement with STIN. As part of the agreement, the Company received $1.6 million in exchange for certain hardware and system assets for the cloud telephony and remaining support service business.

During the second quarter of 2020, the Company entered into an agreement with STIN and AP Capital Holdings II, LLC (“APC”) to divest its remaining equity interest in STIN as well as settle its paid-in-kind purchase money note (“PIK note”) and certain amounts due as of December 31, 2019 in consideration for a $9.0 million secured promissory note (the “Note”), which includes contingent consideration of up to $16.0 million. The Note has an 8% interest rate and a 3-year stated term. As part of the arrangement, APC acquired a majority stake of STIN. Additionally, in the event of a Sale of STIN by APC and STIN at a future date, the Company shall receive 5% of such sale proceeds, after reducing the sale proceeds by any outstanding amounts of the above Note, including any earned contingent consideration. The Company determined the preliminary fair value of the netNote as of the transaction date to be approximately $4.8 million. The Company determined the fair value of the Note using a discounted cash flow analysis, which discounts the expected future cash flows of the asset to determine its fair value. The fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement. The Note has been reflected in Other assets acquiredon the Condensed Consolidated balance sheet. No gain or loss was recognized as a result of the transaction.

Additionally, the Company has renewed its commercial agreement with STIN to continue to provide software and managed support services.

7. Debt

2019 Revolving Credit Facility

On October 4, 2019, the Company entered into a Credit Agreement with Citizens Bank, N.A., for a $10.0 million Revolving Credit Facility. Borrowings under the Revolving Credit Facility bear interest at a rate equal to, at the Company’s option, either (1) the arithmetic average of the LIBOR rate determined by reference to the costs of funds for U.S. dollar deposits for the interest period (one, three or six months (or 12 months if agreed to by all applicable Lenders)) as selected by the Company relevant to such borrowing plus the applicable margin, or (2) a base rate determined by reference to the greatest of the federal funds rate plus 0.50%, the prime commercial lending rate as determined by the Agent, and the daily LIBOR rate plus 1.00%, in each case plus an applicable margin and subject to a floor of 0%. In addition, on a quarterly basis, the Company is required to pay each lender under the Revolving Credit Facility a 0.2% commitment fee in respect of commitments under the Revolving Credit Facility, which may be subject to adjustment based on the Company’s total leverage ratio. The outstanding balance under the Revolving Credit Facility as of June 30, 2020 is $10.0 million.

Interest expense
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
(Amounts in tables in thousands, except for per share data or unless otherwise noted)


The following table summarizes the Company’s interest expense:
Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Convertible Senior Notes
Amortization of debt issuance costs$—  $82  $—  $237  
Interest on borrowings—  106  —  297  
2019 Revolving Credit Facility—  —  
Amortization of debt issuance costs12  —  28  —  
Commitment fee—  —  4  —  
Interest on borrowings68  —  82  —  
Other4  275  215  514  
Total$84  $463  $329  $1,048  

8. Accumulated Other Comprehensive (Loss) / Income

The changes in accumulated other comprehensive (loss) income during the six months ended June 30, 2020 were as follows:
Balance at December 31, 2019Other comprehensive lossTax effectBalance at June 30, 2020
Foreign currency$(28,204) $(2,069) $(30,273) 
Unrealized loss on intra-entity foreign currency transactions(4,306) 253  (71) (4,124) 
Unrealized holding gains (losses) on marketable debt securities(751) 751  —  —  
Total$(33,261) $(1,065) $(71) $(34,397) 

18
 Purchase Price
Allocation		  
Cash$4,110
  
Prepaid expenses and other assets3,473
  
Property, Plant & Equipment2,882  
Long term assets2,396
  
Intangible assets:  Wtd. Avg.
Tradename1,000
 1 year
Technology32,100
 7 years
Customer relationships29,000
 10 years
Goodwill93,930
  
Total assets acquired168,891
  
Accounts payable and accrued liabilities17,722
  
Deferred revenues7,854
  
Long term liabilities18,777
  
Net assets acquired$124,538
  
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
(Amounts in tables in thousands, except for per share data or unless otherwise noted)


9. Stockholders’ Equity

There were no significant changes to Company’s authorized capital stock and preferred stock during the six months ended June 30, 2020.

Common Stock

Each holder of common stock is entitled to vote on all matters and is entitled to 1 vote for each share held. Dividends on common stock will be paid when, and if, declared by the Company’s Board of Directors. NaN dividends have ever been declared or paid by the Company.

Preferred Stock

The goodwill recordedBoard of Directors is authorized to issue preferred shares and has the discretion to determine the rights, preferences, privileges and restrictions, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences of preferred stock.

In accordance with the terms of the Share Purchase Agreement dated as of October 17, 2017 (the “PIPE Purchase Agreement”), with Silver Private Holdings I, LLC, an affiliate of Siris (“Silver”), on February 15, 2018, the Company issued to Silver 185,000 shares of its newly issued Series A Convertible Participating Perpetual Preferred Stock (the “Series A Preferred Stock”), par value $0.0001 per share, with an initial liquidation preference of $1,000 per share, in connection with this acquisition was basedexchange for $97.7 million in cash and the transfer from Silver to the Company of the 5,994,667 shares of the Company’s common stock held by Silver (the “Preferred Transaction”).

As of June 30, 2020, there were 233,217 shares of Series A Preferred Stock outstanding, including the initial issuance of 185,000 shares of Series A Preferred Stock and the issuance of 48,217 shares of Series A Preferred Stock as dividends.

Certificate of Designation of the Series A Preferred Stock

The rights, preferences, privileges, qualifications, restrictions and limitations of the shares of Series A Preferred Stock are set forth in the Series A Certificate. Under the Series A Certificate, the holders of the Series A Preferred Stock are entitled to receive, on operating synergieseach share of Series A Preferred Stock on a quarterly basis, an amount equal to the dividend rate of 14.5% divided by four and multiplied by the then-applicable Liquidation Preference (as defined in the Series A Certificate) per share of Series A Preferred Stock (collectively, the “Preferred Dividends”). The Preferred Dividends are due on January 1, April 1, July 1 and October 1 of each year (each, a “Series A Dividend Payment Date”). The Company may choose to pay the Preferred Dividends in cash or in additional shares of Series A Preferred Stock. In the event the Company does not declare and pay a dividend in-kind or in cash on any Series A Dividend Payment Date, the unpaid amount of the Preferred Dividend will be added to the Liquidation Preference. In addition, the Series A Preferred Stock participates in dividends declared and paid on shares of the Company’s common stock.

Each share of Series A Preferred Stock is convertible, at the option of the holder, into the number of shares of common stock equal to the “Conversion Price” (as that term is defined in the Series A Certificate) multiplied by the then applicable “Conversion Rate” (as that term is defined in the Series A Certificate). Each share of Series A Preferred Stock is initially convertible into 55.5556 shares of common stock, representing an initial “conversion price” of approximately $18.00 per share of common stock. The Conversion Rate is subject to equitable proportionate adjustment in the event of stock splits, recapitalizations and other benefits expectedevents set forth in the Series A Certificate.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
(Amounts in tables in thousands, except for per share data or unless otherwise noted)

On and after February 15, 2023, holders of shares of Series A Preferred Stock have the right to result fromcause the combined operationsCompany to redeem each share of Series A Preferred Stock for cash in an amount equal to the sum of the current liquidation preference and any accrued dividends. Each share of Series A Preferred Stock is also redeemable at the option of the holder upon the occurrence of a “Fundamental Change” (as that term is defined in the Series A Certificate) at a specified premium (“Liquidation Value”). In addition, the Company is also permitted to redeem all outstanding shares of the Series A Preferred Stock at any time (i) within the first 30 months of the date of issuance for the sum of the then-applicable Liquidation Preference, accrued but unpaid dividends and a make whole amount (known as “Redemption Value”) and (ii) following the 30-month anniversary of the date of issuance for the sum of the then-applicable Liquidation Preference and the assembled workforce acquired. accrued but unpaid dividends. As of June 30, 2020, the Liquidation Value and Redemption Value of the Preferred Shares was $243.1 million.

The goodwill acquiredholders of a majority of the Series A Preferred Stock, voting separately as a class, are entitled at each of the Company’s annual meetings of stockholders or at any special meeting called for the purpose of electing directors (or by written consent signed by the holders of a majority of the then-outstanding shares of Series A Preferred Stock in lieu of such a meeting): (i) to nominate and elect 2 members of the Company’s Board of Directors for so long as the Preferred Percentage (as defined in the Series A Certificate) is equal to or greater than 10%; and (ii) to nominate and elect 1 member of the Company’s Board of Directors for so long as the Preferred Percentage is equal to or greater than 5% but less than 10%.

For so long as the holders of shares of Series A Preferred Stock have the right to nominate at least one director, the Company is required to obtain the prior approval of Silver prior to taking certain actions, including: (i) certain dividends, repayments and redemptions; (ii) any amendment to the Company’s certificate of incorporation that adversely effects the rights, preferences, privileges or voting powers of the Series A Preferred Stock; (iii) issuances of stock ranking senior or equivalent to shares of Series A Preferred Stock (including additional shares of Series A Preferred Stock) in the priority of payment of dividends or in the distribution of assets upon any liquidation, dissolution or winding up of the Company; (iv) changes in the size of the Company’s Board of Directors; (v) any amendment, alteration, modification or repeal of the charter of the Company’s Nominating and Corporate Governance Committee of the Board of Directors and related documents; and (vi) any change in the Company’s principal business or the entry into any line of business outside of the Company’s existing lines of businesses. In addition, in the event that the Company is in EBITDA Non-Compliance (as defined in the Series A Certificate) or the undertaking of certain actions would result in the Company exceeding a specified pro forma leverage ratio, then the prior approval of Silver would be required to incur indebtedness (or alter any debt document) in excess of $10.0 million, enter or consummate any transaction where the fair market value exceeds $5.0 million individually or $10.0 million in the aggregate in a fiscal year or authorize or commit to capital expenditures in excess of $25.0 million in a fiscal year.

Each holder of Series A Preferred Stock has 1 vote per share on any matter on which holders of Series A Preferred Stock are entitled to vote separately as a class, whether at a meeting or by written consent. The holders of Series A Preferred Stock are permitted to take any action or consent to any action with respect to such rights without a meeting by delivering a consent in writing or electronic transmission of the holders of the Series A Preferred Stock entitled to cast not deductibleless than the minimum number of votes that would be necessary to authorize, take or consent to such action at a meeting of stockholders. In addition to any vote (or action taken by written consent) of the holders of the shares of Series A Preferred Stock as a separate class provided for tax purposes.in the Series A Certificate or by the General Corporation Law of the State of Delaware, the holders of shares of the Series A Preferred Stock are entitled to vote with the holders of shares of common stock (and any other class or series that may similarly be entitled to vote on an as-converted basis with the holders of common stock) on all matters submitted to a vote or to the consent of the stockholders of the Company (including the election of directors) as one class.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
(Amounts in tables in thousands, except for per share data or unless otherwise noted)

Under the Series A Certificate, if Silver and certain of its affiliates have elected to effect a conversion of some or all of their shares of Series A Preferred Stock and if the sum, without duplication, of (i) the aggregate number of shares of the Company’s common stock issued to such holders upon such conversion and any shares of the Company’s common stock previously issued to such holders upon conversion of Series A Preferred Stock and then held by such holders, plus (ii) the number of shares of the Company’s common stock underlying shares of Series A Preferred Stock that would be held at such time by such holders (after giving effect to such conversion), would exceed the 19.9% of the issued and outstanding shares of the Company’s voting stock on an as converted basis (the “Conversion Cap”), then such holders would only be entitled to convert such number of shares as would result in the sum of clauses (i) and (ii) (after giving effect to such conversion) being equal to the Conversion Cap (after giving effect to any such limitation on conversion). Any shares of Series A Preferred Stock which a holder has elected to convert but which, by reason of the previous sentence, are not so converted, will be treated as if the holder had not made such election to convert and such shares of Series A Preferred Stock will remain outstanding. Also, under the Series A Certificate, if the sum, without duplication, of (i) the aggregate voting power of the shares previously issued to Silver and certain of its affiliates held by such holders at the record date, plus (ii) the aggregate voting power of the shares of Series A Preferred Stock held by such holders as of such record date, would exceed 19.99% of the total voting power of the Company’s outstanding voting stock at such record date, then, with respect to such shares, Silver and certain of its affiliates are only entitled to cast a number of votes equal to 19.99% of such total voting power. The limitation on conversion and voting ceases to apply upon receipt of the requisite approval of holders of the Company’s common stock under the applicable listing standards.

Investor Rights Agreement
 
Acquisition-related costs recognizedConcurrently with the closing of the Preferred Transaction, Synchronoss and Silver entered into an Investor Rights Agreement.  Under the terms of the Investor Rights Agreement, Silver and Synchronoss have agreed that, effective as of the closing of the Preferred Transaction, the Board of Directors of Synchronoss will consist of 10 members.  From and after the closing of the Preferred Transaction, so long as the holders of Series A Preferred Stock have the right to nominate a member to the Board of Directors pursuant to the Series A Certificate, the Board of Directors of Synchronoss will consist of (i) 2 directors nominated and elected by the holders of shares of Series A Preferred Stock; (ii) 4 directors who meet the independence criteria set forth in the applicable listing standards (each of whom will be initially agreed upon by Synchronoss and Silver); and (iii) 4 other directors, 2 of whom shall satisfy the independence criteria of the applicable listing standards and, as of the closing of the Preferred Transaction, 1 of whom shall be the individual then serving as chief executive officer of Synchronoss and 1 of whom shall be the current chairman of the Board of Directors of Synchronoss as of the date of execution of the Investors Rights Agreement.  Following the closing of the Preferred Transaction, so long as the holders of Series A Preferred Stock have the right to nominate at least 1 director to the Board of Directors of Synchronoss pursuant to the Series A Certificate, Silver will have the right to designate 2 members of the Nominating and Corporate Governance Committee of the Board of Directors.
Pursuant to the terms of the Investor Rights Agreement, neither Silver nor its affiliates may transfer any shares of Series A Preferred Stock subject to certain exceptions (including transfers to affiliates that agree to be bound by the terms of the Investor Rights Agreement).
For so long as Silver has the right to appoint a director to the Board of Directors of Synchronoss, without the prior approval by a majority of directors voting who are not appointed by the holders of shares of Series A Preferred Stock, neither Silver nor its affiliates will directly or indirectly purchase or acquire any debt or equity securities of Synchronoss (including equity-linked derivative securities) if such purchase or acquisition would result in Silver’s Standstill Percentage (as defined in the Investor Rights Agreement) being in excess of 30%. However, the foregoing standstill restrictions would not prohibit the purchase of shares pursuant to the PIPE Purchase Agreement or the receipt of shares of Series A Preferred Stock issued as Preferred Dividends pursuant to the Series A Certificate, shares of Common Stock received upon conversion of shares of Series A Preferred Stock or receipt of any shares of Series A Preferred Stock, Common Stock or other securities of the Company otherwise paid as dividends or as an increase of the Liquidation Preference (as defined in the Series A Certificate) or distributions thereon.  Silver will also have preemptive rights with respect to issuances of securities of Synchronoss to maintain its ownership percentage.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
(Amounts in tables in thousands, except for per share data or unless otherwise noted)

Under the terms of the Investor Rights Agreement, Silver will be entitled to (i) 3 demand registrations, with no more than 2 demand registrations in any single calendar year and provided that each demand registration must include at least 10% of the shares of Common Stock held by Silver, including shares of Common Stock issuable upon conversion of shares of Series A Preferred Stock and (ii) unlimited piggyback registration rights with respect to primary issuances and all other issuances.

A summary of the Company’s Series A Convertible Participating Perpetual Preferred Stock balance at June 30, 2020 and changes during the ninesix months ended SeptemberJune 30, 20162020, are presented below:
Preferred Stock
SharesAmount
Balance at December 31, 2019217  $200,865  
Issuance of preferred stock16  —  
Amortization of preferred stock issuance costs—  1,585  
Issuance of preferred PIK dividend—  16,031  
Balance at June 30, 2020233  $218,481  

Registration Rights

There were no significant changes to the Company’s registration rights during the three and six months ended June 30, 2020.

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SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
(Amounts in tables in thousands, except for per share data or unless otherwise noted)

Stock Plans

There were no significant changes to the Company’s Stock Plans during the three and six months ended June 30, 2020. As of June 30, 2020, there were 0.5 million shares available for the grant or award under the Company’s 2015 including transaction costsPlan and 0.3 million shares available for the grant or award under the Company’s 2017 New Hire Equity Incentive Plan.

The Company’s performance cash awards granted to executives under the Long Term Incentive (“LTI”) Plans have been accounted for as liability awards, due to the Company’s intent and the ability to settle such as legal, accounting, valuationawards in cash upon vesting and other professional services, were $2.9 million and $1.0 million, respectively and are includedthe Company has reflected such awards in accrued expenses. As of June 30, 2020, the selling, general and administrative expenses on the condensed consolidated statements of income.liability for such awards is approximately $0.7 million.


6. Stockholders’ Equity
Stock-Based Compensation


The following table summarizes information about stock-based compensation:compensation expense related to all of the Company’s stock awards included by operating expense categories, as follows:
Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Cost of revenues$642  $657  $1,394  $1,343  
Research and development1,071  889  2,502  2,114  
Selling, general and administrative3,274  3,927  6,260  7,571  
Total stock-based compensation expense$4,987  $5,473  $10,156  $11,028  
 Three Months Ended September 30, Nine Months Ended September 30,
 2016 2015 2016 2015
Stock options$1,989
 $2,221
 $5,957
 $6,361
Restricted stock awards6,786
 5,776
 18,794
 14,398
ESPP Plan206
 150
 656
 475
Total stock-based compensation before taxes$8,981
 $8,147
 $25,407
 $21,234
Tax benefit$2,949
 $2,570
 $8,311
 $6,701

The following table summarizes stock-based compensation expense related to all of the Company’s stock awards included by award type, as follows:
Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Stock options$1,805  $1,796  $3,588  $3,493  
Restricted stock awards2,962  3,526  6,296  7,324  
Performance Based Cash Units220  151  272  211  
Total stock-based compensation before taxes$4,987  $5,473  10,156  11,028  
Tax benefit$664  $1,056  $1,588  $2,114  

The total stock-based compensation cost related to unvested equity awards as of SeptemberJune 30, 20162020 was approximately $73.4$24.2 million. The expense is expected to be recognized over a weighted-average period of approximately 2.651.54 years.



The total stock-based compensation cost related to unvested performance based cash units as of June 30, 2020 was approximately $1.2 million. The expense is expected to be recognized over a weighted-average period of approximately 1.97 years.

Stock Options

There were no significant changes to the Company’s Stock Option Plans during the three and six months ended June 30, 2020.

14
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SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
(Amounts in tables in thousands, except for per share data or unless otherwise noted)


Stock Options
The Company uses the Black-Scholes option pricing model for determining the estimated fair value for stock options. The weighted-average assumptions used in the Black-Scholes option pricing model are as follows: 

Three Months Ended September 30, Nine Months Ended September 30,Three Months Ended June 30,Six Months Ended June 30,
2016 2015 2016 20152020201920202019
Expected stock price volatility46% 46% 45% 48%Expected stock price volatility76.1 %69.6 %72.0 %69.6 %
Risk-free interest rate1.27% 1.27% 1.16% 1.26%Risk-free interest rate0.4 %1.9 %1.4 %1.9 %
Expected life of options (in years)3.98
 3.98
 4.00
 4.00
Expected life of options (in years)4.454.344.424.33
Expected dividend yield0% 0% 0% 0%Expected dividend yield0.0 %0.0 %0.0 %0.0 %
Weighted-average fair value (grant date) of the options$15.53
 $15.53
 $11.08
 $16.54
Weighted-average fair value (PSV) of the optionsWeighted-average fair value (PSV) of the options$1.73  $3.77  $3.08  $3.78  

The following table summarizes information about stock options outstanding as of SeptemberJune 30, 2016:2020: 
OptionsNumber of
Options		Weighted-Average
Exercise Price		Weighted-Average
Remaining
Contractual
Term (Years)		Aggregate
Intrinsic
Value
Outstanding at December 31, 20194,922  $14.54  
Options Granted1,534  5.41  
Options Exercised—  —  
Options Cancelled(312) 17.09  
Outstanding at June 30, 20206,144  $12.13  5.17$—  
Vested at June 30, 20202,244  $19.72  3.61$—  
Exercisable at June 30, 20202,244  $19.72  3.61$—  
Options 
Number of
Options
 
Weighted-
Average
Exercise Price
 
Weighted-
Average
Remaining
Contractual
Term (Years)
 
Aggregate
Intrinsic
Value
Outstanding at December 31, 2015 2,348
 $31.04
    
Options Granted 862
 30.85
    
Options Exercised (432) 21.74
    
Options Cancelled (169) 36.38
    
Outstanding at September 30, 2016 2,609
 $32.17
 4.76 $24,664
Vested at September 30, 2016 2,445
 $32.08
 4.68 $23,261
Exercisable at September 30, 2016 1,129
 $29.97
 3.08 $13,049

The below table summarizes additional information related tototal intrinsic value of stock options: options exercisable at June 30, 2020 and 2019 was NaN and NaN, respectively. The total intrinsic value of stock options exercised during the six months ended June 30, 2020 and 2019 was NaN and NaN, respectively.
 Three Months Ended September 30, Nine Months Ended September 30,
 2016 2015 2016 2015
Total intrinsic value for stock options exercised$2,157
 $3,597
 $5,796
 $15,141
Fair value of vested options3,571
 2,064
 27,241
 18,741

Awards of Restricted Stock and Performance Stock

There were no significant changes to the Company’s restricted stock award (“Restricted Stock”) and performance stock plan during the three and six months ended June 30, 2020.

A summary of the Company’s unvested restricted stock at SeptemberJune 30, 2016,2020, and changes during the ninesix months ended SeptemberJune 30, 2016,2020, is presented below:
Unvested Restricted StockNumber of
Awards		Weighted- Average
Grant Date
Fair Value
Unvested at December 31, 20193,375  $8.68  
Granted260  5.14  
Vested(1,072) 9.07  
Forfeited(343) 7.76  
Unvested at June 30, 20202,220  $7.50  

Restricted stock awards are granted subject to other service conditions or service and performance conditions (“Performance-Based Awards”). Restricted stock and Performance-Based Awards are measured at the closing stock price at the date of grant and are recognized straight line over the requisite service period.

24
Non-Vested Restricted Stock 
Number of
Awards
 
Weighted- Average
Grant Date
Fair Value
Non-vested at December 31, 2015 1,412
 $36.80
Granted 907
 33.90
Vested (569) 35.68
Forfeited (134) 38.85
Non-vested at September 30, 2016 1,616
 $35.40

15
SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
(Amounts in tables in thousands, except for per share data or unless otherwise noted)



Employee Stock PurchasePerformance Based Cash Units

Performance based cash units granted under the Company’s 2015 Plan
On February 1, 2012, vest at the Company establishedend of a ten year Employee Stock Purchase Plan (“ESPP” or “the Plan”) forthree-year period based on service and achievement of certain eligible employees. The Plan is to be administeredperformance objectives determined by the Company’s Board of Directors. The total number of shares available for purchase under the Plan is 500 thousand shares

A summary of the Company’s Common Stock. Employees participate over aunvested performance-based cash units at June 30, 2020 and changes during the six month period through payroll withholdings and may purchase,months ended June 30, 2020, is presented below:
Unvested Cash UnitsNumber of
Units		Period End Fair Value
Unvested at December 31, 20191,046  $4.75  
Granted1,391  —  
Vested—  —  
Forfeited(180) —  
Unvested at June 30, 20202,257  $3.53  

Performance based cash units are measured at the end of the six month period, the Company’s Common Stockclosing stock price at the lowerreporting period end date and are recognized straight line over the requisite service period. The expense for the period will increase or decrease based on updated fair values of 85% of the fair market value on the first day of the offering period or the fair market value on the purchasethese awards at each reporting date. No participant will be granted a right to purchase Common Stock under the Plan if such participant would own more than 5% of the total combined voting power of the Company. In addition, no participant may purchase more than a thousand shares of Common Stock within any purchase period or with a value greater than $25 thousand in any calendar year.

Treasury Stock
On February 4, 2016, the Company's Board of Directors authorized a stock repurchase program to purchase up to $100 million of the Company's outstanding Common Stock. Under the program, the Company may purchase shares of its Common Stock in the open market, through block trades or otherwise at prices deemed appropriate by the Company. The timing and amount of repurchase transactions under the program will depend on available working capital and other factors as determined by the Board of Directors and management.
As of September 30, 2016, a total of 1.3 million shares have been purchased under the program for an aggregate purchase price of $40 million. The Company classifies Common Stock repurchased as Treasury Stock on its balance sheet.
7. Accumulated Other Comprehensive Income (Loss)
Comprehensive income (loss) was as follows: 
25
 Three Months Ended September 30, Nine Months Ended September 30,
 2016 2015 2016 2015
Net income (loss) attributable to Synchronoss$7,676
 $9,645
 $(4,717) $35,360
Translation adjustments2,645
 (971) 6,089
 (11,681)
Unrealized gain on securities, (net of tax)147
 255
 145
 389
Net income (loss) on intra-entity foreign currency transactions, (net of tax)300
 65
 662
 (2,047)
Total comprehensive income attributable to Synchronoss$10,768
 $8,994
 $2,179
 $22,021
The changes in accumulated other comprehensive income (loss) during the nine months ended September 30, 2016, are as follows: 
 
Foreign
Currency
 
Unrealized 
(Loss) 
Income on
Intra-Entity
Foreign
Currency
Transactions
 
Unrealized Holding
Gains
(Losses) on
Available-for-Sale
Securities
 Total
Balance at December 31, 2015$(34,092) $(4,292) $(300) $(38,684)
Other comprehensive income6,089
 809
 305
 7,203
Tax effect—
 (147) (160) (307)
Total comprehensive income6,089

662

145

6,896
Balance at September 30, 2016$(28,003)
$(3,630)
$(155)
$(31,788)


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SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
(Amounts in tables in thousands, except for per share data or unless otherwise noted)


10. Income Taxes
8. Goodwill
In March 2020, in response to the COVID-19 pandemic, the Coronavirus Aid, Relief and IntangiblesEconomic Security Act (“CARES Act”) was signed into law. The CARES Act provides numerous tax provisions and other stimulus measures, including temporary changes regarding the prior and future utilization of net operating losses. The CARES Act amends the Net Operating Loss (“NOL”) provisions of the Tax Cuts and Jobs Act, allowing for the carryback of losses arising in tax years 2018, 2019 and 2020, to each of the five taxable years preceding the taxable year of loss. The Company filed a carryback claim in the second quarter of 2020 for the NOL generated in tax year 2018, which will result in a refund of previously paid taxes. The carryback of the 2018 NOL will result in an increase in the Company’s 2019 tax liability, so the Company has also recorded an estimate of the additional 2019 current tax expense in the first quarter income tax provision. The estimated net income tax benefit associated with the 2018 NOL carryback is approximately $9 million, and this was recorded discretely in the first quarter income tax provision.

GoodwillIn April 2020, there was a redemption of the Company’s partnership interest in STIN. The total discrete benefit related to the exit from STI was $12.1 million which included the settlement of certain trade receivables.

The Company records goodwill which representsrecognized approximately $20.4 million and $3.2 million in related income tax benefit during the excesssix months ended June 30, 2020 and 2019, respectively. The effective tax rate was approximately 83.5% for the six months ended June 30, 2020. The effective tax rate was primarily driven by the impact of the purchase price over the fair value of assets acquired, including other definite-lived intangible assets. Goodwill is reviewed annually for impairment or upon the occurrence of events or changes in circumstances that would more likely than not reduce the fair valueredemption of the reporting unit below its carrying amount.Company’s interest in STIN, the new NOL carryback provisions discussed above and valuation allowances recorded in domestic and foreign jurisdictions, partially offset by the impact of permanent book-tax differences. The Company continues to consider all available evidence, including historical profitability and projections of future taxable income together with new evidence, both positive and negative, that could affect the view of the future realization of deferred tax assets. As a result of the assessment, no change was recorded by the Company to the valuation allowance during the six months ended June 30, 2020.

11. Restructuring

The Company continues to execute certain restructurings to identify workforce optimization opportunities to better align the Company’s resources with its key strategic priorities. A summary of the Company’s restructuring accrual at June 30, 2020 and changes in goodwill during the ninesix months ended SeptemberJune 30, 20162020, are as follows: presented below:

Balance at December 31, 2019ChargesPaymentsOther AdjustmentsBalance at June 30, 2020
Employment termination costs$90  $5,943  $(1,975) $(5) $4,053  

26
Balance at December 31, 2015$221,271
Acquisition93,930
Reclassifications, adjustments and other(3,033)
Translation adjustments3,017
Balance at September 30, 2016$315,185
The reclassification adjustment of $3.0 million is primarily related to a change in the Company’s deferred tax asset in connection with a pre-acquisition tax loss.

Other Intangible Assets
Intangible assets consist primarily of trade names, technology, and customer lists and relationships. These intangible assets are amortized on the straight‑line method over the estimated useful life. Amortization expense for the nine months ended September 30, 2016 and the year ended December 31, 2015 was $35.0 million and $28.6 million, respectively.
The Company’s intangible assets consist of the following: 
 September 30, 2016
 Cost 
Accumulated
Amortization
 Net
Trade name$2,541
 $(2,012) $529
Technology162,744
 (55,546) 107,198
Customer lists and relationships137,645
 (47,901) 89,744
Capitalized software and patents23,874
 (5,679) 18,195
 $326,804

$(111,138)
$215,666
 December 31, 2015
 Cost 
Accumulated
Amortization
 Net
Trade name$1,531
 $(1,372) $159
Technology130,200
 (35,336) 94,864
Customer lists and relationships105,864
 (33,969) 71,895
Capitalized software and patents11,406
 (4,002) 7,404
 $249,001
 $(74,679) $174,322

17
SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
(Amounts in tables in thousands, except for per share data or unless otherwise noted)


12. Earnings per Common Share (“EPS”)
Estimated future amortization expense
Basic EPS is computed based upon the weighted average number of its intangible assetscommon shares outstanding for the next five yearsyear. Diluted EPS is as follows: 
Year ending December 31, 
2016$12,079
201749,338
201846,218
201938,984
202025,302
202113,161
9. Debt
Credit Facility
In September 2013,computed based upon the Company entered into a Credit Agreement (the “Credit Facility”) with JP Morgan Chase Bank, N.A., asweighted average number of common shares outstanding for the administrative agent, Wells Fargo Bank, National Association, asyear plus the syndication agentdilutive effect of common stock equivalents using the treasury stock method and Capital One, National Association and KeyBank National Association, as co-documentation agents.  The Credit Facility, which was usedthe average market price of the Company’s common stock for general corporate purposes, was a $100 million unsecured revolving line of credit that matures on September 27, 2018.the year. The Company paid a commitment feeincludes participating securities (Redeemable Convertible Preferred Stock - Participation with Dividends on Common Stock that contain preferred dividend) in the rangecomputation of 25EPS pursuant to 35 basis points on the unused balancetwo-class method. The two-class method of computing earnings per share is an allocation method that calculates earnings per share for common stock and participating securities. During periods of net loss, no effect is given to the participating securities because they do not share in the losses of the revolving credit facility underCompany.

The following table provides a reconciliation of the Credit Agreement. Synchronoss hadnumerator and denominator used in computing basic and diluted net income attributable to common stockholders per common share from continued and discontinued operations.

Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Numerator - Basic:
Net loss from continuing operations$(694) $(16,578) $(4,044) $(36,315) 
Net loss attributable to redeemable noncontrolling interests(165) (593) (182) (906) 
Preferred stock dividend(9,289) (7,859) (18,197) (15,396) 
Net loss attributable to Synchronoss$(10,148) $(25,030) $(22,423) $(52,617) 
Numerator - Diluted:
Net loss from continuing operations attributable to Synchronoss$(10,148) $(25,030) $(22,423) $(52,617) 
Income effect for interest on convertible debt, net of tax—  —  —  —  
Net loss from continuing operations adjusted for the convertible debt(10,148) (25,030) (22,423) (52,617) 
Denominator:
Weighted average common shares outstanding — basic41,697  40,810  41,482  40,566  
Dilutive effect of:
Shares from assumed conversion of convertible debt 1
—  —  —  —  
Shares from assumed conversion of preferred stock 2
—  —  —  —  
Options and unvested restricted shares—  —  —  —  
Weighted average common shares outstanding — diluted41,697  40,810  41,482  40,566  
Basic EPS
Earnings per share:
Basic$(0.24) $(0.61) $(0.54) $(1.30) 
Diluted$(0.24) $(0.61) $(0.54) $(1.30) 
Anti-dilutive stock options excluded—  —  —  —  
Unvested shares of restricted stock awards2,220  3,691  2,220  3,691  

(1) The calculation does not include the right to request an increase ineffect of assumed conversion of convertible debt of 1,451,173 shares for the aggregatethree months ended June 30, 2019, which is based on 18.8072 shares per $1,000 principal amount of the Credit Facility to $150 million. Senior Convertible Notes.

Interest(2) The calculation does not include the effect of assumed conversion of preferred stock of 12,956,487 and 11,041,017 shares, for the three months ended June 30, 2020 and 2019, respectively, which is based on the borrowings were based upon LIBOR plus a 2.25 basis point margin. All outstanding balances under the Credit Facility were repaid on July 7, 2016 and the Credit Facility was terminated and replaced with the Amended Credit Facility.

Amended Credit Facility

On July 7, 2016, the Company entered into an Amended and Restated Credit Agreement (the “Credit Agreement”) with Wells Fargo Bank, National Association, as administrative agent (the “Administrative Agent”) and the several lenders party thereto (the “Amended Credit Facility”). The Amended Credit Facility, which will be used for general corporate purposes, is a $250 million unsecured revolving line of credit that matures on July 7, 2021, subject to terms and conditions set forth therein.  The Company pays a commitment fee in the range of 15 to 30 basis points on the unused balance of the revolving credit facility under the Credit Agreement. Synchronoss has the right to request an increase in the aggregate55.5556 shares per $1,000 principal amount of the Amended Credit Facility to $350 million.preferred stock, because the effect would have been anti–dilutive.

Interest on the borrowing was based upon LIBOR plus a 1.99 basis point margin. As of September 30, 2016, the Company had an outstanding balance of $38 million on the Amended Credit Facility.
The Amended Credit Facility is subject to certain financial covenants. As of September 30, 2016, the Company was in compliance with all required covenants.
Interest expense and commitment fees under the Credit Facility and the Amended Credit Facility were as follows:
27
 Three Months Ended September 30, Nine Months Ended September 30,
 2016 2015 2016 2015
Commitment fees$154
 $89
 $272
 $241
Interest expense230
 —
 753
 —

Convertible Senior Notes
On August 12, 2014, the Company issued $230.0 million aggregate principal amount of its 0.75% Convertible Senior Notes due in 2019 (the “2019 Notes”). The 2019 Notes mature on August 15, 2019, and bear interest at a rate of 0.75% per annum payable semi-annually in arrears on February 15 and August 15 of each year. The Company accounted for the $230.0 million face value of the debt as a liability and capitalized approximately $7.1 million of financing fees, related to the issuance which are presented net of the face value of the 2019 Notes on the balance sheet.

18
SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
(Amounts in tables in thousands, except for per share data or unless otherwise noted)


13. Commitments, Contingencies and Other

Purchase Obligations

Aggregate annual future minimum payments under non-cancelable agreements are as follows:
As of June 30, 2020Non-cancelable agreements
2020$17,541  
20213,665  
20222,207  
2023 and thereafter1,563  
Total$24,976  

Legal Matters

In the ordinary course of business, the Company is regularly subject to various claims, suits, regulatory inquiries and investigations. The 2019 NotesCompany records a liability for specific legal matters when it determines that the likelihood of an unfavorable outcome is probable, and the loss can be reasonably estimated. Management has also identified certain other legal matters where they believe an unfavorable outcome is not probable and, therefore, no reserve is established. Although management currently believes that resolving claims against the Company, including claims where an unfavorable outcome is reasonably possible, will not have a material impact on the Company’s business, financial position, results of operations, or cash flows, these matters are senior, unsecured obligationssubject to inherent uncertainties and management’s view of these matters may change in the future. The Company also evaluates other contingent matters, including income and non-income tax contingencies, to assess the likelihood of an unfavorable outcome and estimated extent of potential loss. It is possible that an unfavorable outcome of one or more of these lawsuits or other contingencies could have a material impact on the liquidity, results of operations, or financial condition of the Company.

On May 1, 2017, May 2, 2017, June 8, 2017 and June 14, 2017, four putative class actions were filed against the Company and are convertible into sharescertain of its common stock based on a conversion rate of 18.8072 shares per $1,000 principal amount of 2019 Notes which is equivalent to an initial conversion price of approximately $53.17 per share. The Company will satisfy any conversion of the 2019 Notes with shares of the Company’s common stock. The 2019 Notes are convertible at the note holders’ option prior to their maturitycurrent and if specified corporate transactions occur. The issue price of the 2019 Notes was equal to their face amount.
Holders of the 2019 Notes who convert their notes in connection with a qualifying fundamental change, as defined in the related indenture, may be entitled to a make-whole premium in the form of an increase in the conversion rate. Additionally, following the occurrence of a fundamental change, holders may require that the Company repurchase some or all of the 2019 Notes for cash at a repurchase price equal to 100% of the principal amount of the notes being repurchased, plus accruedformer officers and unpaid interest, if any. As of September 30, 2016, none of these conditions existed with respect to the 2019 Notes and as a result, the 2019 Notes are classified as long term.
The 2019 Notes are the Company’s direct senior unsecured obligations and rank equal in right of payment to all of the Company’s existing and future unsecured and unsubordinated indebtedness.
At September 30, 2016, the carrying amount of the liability was $225.9 million and the outstanding principal of the 2019 Notes was $230 million, with an effective interest rate of approximately 1.39%. The fair value of the 2019 Notes was $248.3 million at September 30, 2016. The fair value of the liability of the 2019 Notes was determined using a discounted cash flow model based on current market interest rates available to the Company. These inputs are corroborated by observable market data for similar liabilities and therefore classified within Level 2 of the fair-value hierarchy.
Interest expense for the Company’s 2019 Notes related to the contractual interest coupon was:
 Three Months Ended September 30, Nine Months Ended September 30,
 2016 2015 2016 2015
Contractual interest expense$431
 $431
 $1,294
 $1,293

10. Restructuring
In March 2016, the Company initiated the preliminary phase of a work-force reduction as part of a corporate restructuring, with reductions occurring across all levels and departments within the Company. This measure was intended to reduce costs and to align the Company’s resources with its key strategic priorities. As of September 30, 2016, there were $0.4 million of accrued restructuring charges on the balance sheet.
A summary of the Company’s restructuring accrual at September 30, 2016 and changes during the nine months ended September 30, 2016, is presented below: 
 Balance at December 31, 2015 Charges Payments Balance at September 30, 2016
Employment termination costs$—
 $5,139
 $(4,816) $323
Facilities consolidation54
 —
 (10) 44
Total$54
 $5,139
 $(4,826) $367

11. Income Taxes
The Company recognized approximately $6.9 million and $14.9 million in related income tax expense during the three and nine months ended September 30, 2016, respectively. The effective tax rate was approximately 59% and 1,143% for the three and nine months ended September 30, 2016, which was higher than the U.S. federal statutory rate primarily due to the unfavorable impact of losses in foreign jurisdictions which have lower tax rates than the U.S. as well as the unfavorable impact of the fair market value adjustment for the Razorsight contingent consideration. Additionally, the effective tax rate for the nine months ended September 30, 2016 was impacted by the recording of a non-cash income tax provision to establish a $2.9 million valuation allowance, which reduced the deferred tax asset related to the current net operating losses of certain foreign subsidiaries. The Company reviews the expected annual effective income tax rate and makes changes on a quarterly basis as necessary based on certain factors such as changes in forecasted annual operating income, changes to the actual and forecasted permanent book-to-tax differences, and changes resulting from the impact of tax law changes. The early adoption of ASU 2016-09 resulted in a decrease in the effective tax rate for the three months ended September 30, 2016 of 2% and an increase in the effective tax rate for the nine months ended September 30, 2016 of 51%.
12. Legal Matters
On October 7, 2014, the Company filed an amended complaintdirectors in the United States District Court for the District of New Jersey (Civ Act. No. 3:14-cv-06220) against F-Secure Corporation and F-Secure, Inc. (collectively, “F-Secure"(the “Securities Law Action”), claiming that F-Secure has infringed, and continues to infringe, several. After these cases were consolidated, the court appointed as lead plaintiff Employees’ Retirement System of the State of Hawaii, which filed, on November 20, 2017, a consolidated complaint purportedly on behalf of purchasers of the Company’s patents. Incommon stock between February 2015, Synchronoss entered into a patent license3, 2016 and settlement agreement with F-Secure Corporation and F-Secure, Inc. wherebyJune 13, 2017. On February 2, 2018, the Company granted each of these companies (but not their subsidiaries or affiliates) a limited license to Synchronoss’ patents. As a result of entering into the patent license and settlement agreement, the parties filed a joint stipulationdefendants moved to dismiss the aboveconsolidated complaint in its entirety, with prejudice. Before that motion was decided, on August 24, 2018, lead plaintiff filed a consolidated amended complaint purportedly on behalf of purchasers of the Company’s common stock between October 28, 2014 and June 13, 2017. On June 28, 2019, the Court granted defendants’ motion to dismiss the consolidated amended complaint in its entirety, without prejudice, allowing lead plaintiff leave to amend its complaint.
On August 14, 2019, lead plaintiff filed a second amended complaint.The second amended complaint asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and it alleges, among other things, that the defendants made false and misleading statements of material information concerning the Company’s 2011 acquisition agreementfinancial results, business operations, and prospects. On October 4, 2019, the defendants moved to dismiss the second amended complaint in its entirety, with Miyowa SA providedprejudice. On May 29, 2020, the court granted in part and denied in part defendants’ motion to dismiss the second amended complaint without prejudice. The Company believes that former shareholdersthe asserted claims lack merit and intends to defend against all of Miyowa SA would be eligible for earn-out payments,the claims vigorously. The plaintiff seeks unspecified damages, fees, interest, and costs. Due to the extent specified business milestones were achieved following the acquisition. In December 2013, Eurowebfund and Bakamar, two former shareholdersinherent uncertainties of Miyowa SA, filed a complaint against the Company in the Commercial Court of Paris, France claiming that they are entitled to certain earn-out payments under the acquisition agreement. The Company was served with a copy of this complaint in January 2014. On December 3, 2015, the Court dismissed all claims in the complaint against the Company. On December 19, 2015, the former shareholders of Miyowa filed an appeal with the Court of Appeal of Paris, France, appealing the Court’s decision. Althoughlitigation, the Company cannot predict the outcome of the appeal,actions at this time and can give no assurance that the asserted claims will not have a material adverse effect on its financial position or estimate any potential loss ifresults of operations.

28
SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
(Amounts in tables in thousands, except for per share data or unless otherwise noted)

On September 15, 2017, October 24, 2017, October 27, 2017 and October 30, 2017, the outcome is adverse, dueCompany’s shareholders filed derivative lawsuits against certain of its officers and directors and the Company (as nominal defendant) in the United States District Court for the District of New Jersey (the “Derivative Suits”). On May 24, 2018, the Court consolidated the Derivative Suits and appointed Lisa LeBoeuf as lead plaintiff. The lead plaintiff designated as the Operative Complaint the complaint she previously had filed on October 27, 2017. On March 11, 2019, the defendants filed a motion to dismiss the Operative Complaint, which the Court granted in substantial part on November 26, 2019. On December 10, 2019, the defendants filed a motion for reconsideration respecting the only claim to survive the motion to dismiss.. On June 12, 2020, the Court granted the defendants’ motion for reconsideration and dismissed the remaining claim without prejudice, allowing lead plaintiff leave to amend her complaint. On July 13, 2020, lead plaintiff filed an amended complaint. The amended complaint alleges claims related to breaches of fiduciary duty and unjust enrichment. The amended complaint’s allegations relate substantially to the same facts as those underlying the Securities Law Action described above. Plaintiff seeks unspecified damages and for the Company to take steps to improve its corporate governance and internal procedures. The Company believes that the asserted claims lack merit and intends to defend against all of the claims vigorously. Due to the inherent uncertainties of litigation, the Company believescannot predict the positionsoutcome of Eurowebfundthe actions at this time and Bakamar are without merit,can give no assurance that the asserted claims will not have a material adverse effect on its financial position or results of operations.

On March 7, 2019, Synchronoss shareholders, Beth Daniel and Juan Solis, filed a separate derivative lawsuit against certain of the Company’s current and former officers and directors and the Company (as nominal defendant) in the Court of Chancery of the State of Delaware, asserting substantially the same allegations as those underlying the Derivative Suits and the Securities Law Action described above. Plaintiffs seek unspecified damages and for the Company to take steps to improve its corporate governance and internal procedures. On May 20, 2019, the parties stipulated to a stay of the action pending a ruling on the motion to dismiss in the Derivative Suits. The Company believes that the asserted claims lack merit and intends to vigorously defend against all of the claims brought by them.vigorously. Due to the inherent uncertainties of litigation, the Company cannot predict the outcome of the Derivative Suits at this time and can give no assurance that the asserted claims will not have a material adverse effect on our financial position or results of operations.

On June 11, 2020 and June 12, 2020, the Company’s shareholders filed derivative lawsuits against certain of its officers and directors and the Company (as nominal defendant) in the United States District Court for the District of New Jersey (the “Demand Refused Derivative Complaints”). The Demand Refused Derivative Complaints allege claims related to breaches of fiduciary duty, unjust enrichment, and alleged violations of securities laws. The complaints’ allegations relate substantially to the same facts as those underlying the Securities Law Action described above. The Demand Refused Derivative Complaints further allege that each plaintiff made a demand upon the Company’s Board of Directors to investigate the alleged misconduct and that such demand was wrongfully refused. Plaintiffs seek unspecified damages and for the Company to take steps to improve its corporate governance and internal procedures. Due to the inherent uncertainties of litigation, the Company cannot predict the outcome of the actions at this time and can give no assurance that the asserted claims will not have a material adverse effect on its financial position or results of operations.

Except as set forth above, the Company is not currently subject to any legal proceedings that could have a material adverse effect on its operations; however, it may from time to time become a party to various legal proceedings arising in the ordinary course of its business. The Company is currently the plaintiff in several patent infringement cases. The defendants in several of these cases have filed counterclaims. Although the Company cannot predict the outcome of the cases at this time due to the inherent uncertainties of litigation, the Company continues to pursue its claims and believes that the counterclaims are without merit, and the Company intends to defend against all of such counterclaims.

13.14. Additional Financial Information

Other Income, net

The following table sets forth the components of included in the Other Income, net included in the Condensed Consolidated Statements of Operations:
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SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
(Amounts in tables in thousands, except for per share data or unless otherwise noted)

Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
FX gains (losses) (1)
$315  $(462) $101  $(305) 
Income from sale of intangible assets (2)
321  —  2,164  —  
Government Refunds552  —  552  —  
Other (3)
179  438  241  744  
Total$1,367  $(24) $3,058  $439  

(1)Fair value of foreign exchange gains and losses
(2)Represents gain on sale of certain of the Company’s IP addresses
(3)Represents an aggregate of individually immaterial transactions

15. Subsequent Events Review

Verizon

On August 7, 2020, the Company entered into an agreement with Verizon Sourcing LLC (“Verizon”) to amend the terms of Statement of Work No. 1 (“SOW No. 1”) under the existing Application Service Provider Agreement dated April 1, 2013 between Synchronoss and Verizon (the “Original Agreement”). The Amendment, among other things, extends the term of SOW No. 1 through June 30, 2025.

Tax Refund

Subsequent to June 30, 2020, the Company has evaluated all subsequent events through November 8, 2016.received a $13.4 million tax refund for the carryback claim filed in the second quarter of 2020.



Preferred Dividends

Subsequent to June 30, 2020, the Company paid in-kind the accrued Preferred Dividends of $8.5 million.

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ITEM 2.MANAGEMENT'SMANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIALCONDITION AND RESULTS OFOPERATIONS

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to provide a reader of our financial statements with a narrative from the perspective of our management on our financial condition, results of operations, liquidity and certain other factors that may affect our future results. The following discussion and analysis should be read in conjunction with the information set forth in our consolidated financial statementsCondensed Consolidated Financial Statements and the related notes included elsewhere in Item 1 “Financial Information” of this quarterly report on Form 10-Q10-Q.

The words “Synchronoss,” “we,” “our,” “ours,” “us,” and in our annual report Form 10-K for the year ended December 31, 2015.“Company” refer to Synchronoss Technologies, Inc. and its consolidated subsidiaries. This quarterly report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties and are based on the beliefs and assumptions of our management as of the date hereof based on information currently available to our management. Use of words such as “believes,” “expects,” “anticipates,” “intends,” “plans,” “hopes,” “should,” “continues,” “seeks,” “likely” or similar expressions, indicate a forward-looking statement. Forward-looking statements are not guarantees of future performance and involve risks, uncertainties and assumptions.assumptions, including, but not limited to, risks, uncertainties and assumptions relating to the duration and severity of the COVID-19 pandemic and its impact on our business and financial performance. Actual results may differ materially from the forward-looking statements we make. We caution investors not to place substantial reliance on the forward-looking statements included in this quarterly report. These statements speak only as of the date of this quarterly report, (unless another date is indicated), and we undertake no obligation to update or revise the statements in light of future developments. All numbers are expressed in thousands unless otherwise stated.

Overview

We areSynchronoss Technologies, Inc. (“Synchronoss” or the “Company”) is a leading innovatorglobal software and services company that provides essential technologies for the mobile transformation of business. The Company’s portfolio contains offerings such as personal cloud, solutions, software-based activation, secure mobility,secure-mobility, identity management and securescalable messaging for mobile carriers, enterprises, retailers and OEMs across the globe. Our software provides innovative service provider and enterprise solutions that drive billions of transactions on a wide range of connected devices across the world’s leading networks. Our solutions include: activation and provisioning software for devices and services, cloud-based sync, backup, storage and content management capabilities, broadband connectivity solutions, analytics, white label messaging, identity/access management and secure mobility management that enable communications service providers (CSPs), cable operators/multi-services operators (MSOs) and original equipment manufacturers (OEMs) with embedded connectivity (e.g. smartphones, laptops, tablets and MIDs, such as automobiles, wearables for personal health and wellness, and connected homes), multi-channel retailers, medium and large enterprises and their consumers as well as other customers to accelerate and monetize value-added services for secure and broadband networks and connected devices.
Our Activation Software, Synchronoss Personal Cloud™ and Enterpriseplatforms, products and platforms provide end-to-end seamless integration between customer-facing channels/applications, communication services, or devices and “back-office” infrastructure-related systems and processes. Oursolutions. These essential technologies create a better way of delivering the transformative mobile experiences that the Company’s customers rely on our solutions and technology to automate the process of activation and content and settings management for their subscribers’ devices while delivering additional communication services.
Our Synchronoss Activation solution navigates the variety of complex back-end systems of CSPs to provide a best-in-class ordering system by orchestrating the workflow and consolidated automated customer care services. This allows CSPs using our platforms to realize the full benefits of their offerings. The platforms also support, among other automated transaction areas, credit card billing, inventory management, and trouble ticketing. In addition to this, the platform supports customer activation related transactions and other and other services which include managing access service requests, local service requests, local number portability, and directory listings.
Our Synchronoss Personal Cloud™ solution seamlessly transfers content from an old device to a new device, and syncs, backs up and connects consumer’s content from multiple smart devices to our cloud platform. This allows carrier customers to protect and manage their growing cache of personally generated, mobile content over long periods of time.
Our Synchronoss Enterprise solutions support an advanced mobility digital experience for businesses and consumers for accessing and protecting their information. Our identity and access management platform helps consumers and business users to securely authenticate access to online websites to conduct e-commerce transactions or access important data. Our secure mobility platforms help users safely and securely store and share important data. Our solutions are based on understanding assumptions on the behaviors of individuals through the capture of who they are, what they are doing and how, where and when they are doing it. This allows our platformsneed to help reduce fraud, improve cybersecurity detection/preventionthem stay ahead of the curve in competition, innovation, productivity, growth and overall productivity. Our identity and access solution supports both consumers by allowing them to self-register and verify their identity, while providing non-intrusive multi-factor authentication and businesses the ability to be sure the correct person is doing the transaction.  The secure mobility solution combines the identity platform with a “bring your own device” (BYOD) platform that is based on a secure container for accessing data, applications, content and personal information management tools like email, calendar, messaging and notes.operational efficiency.


Our Synchronoss Messaging is a white label messaging platform for service providers and offers a full range of deployment options including full integration with on premise systems, hybrid deployment support for optimal mix of technologies and protecting existing investments, and full cloud deployment for both SaaS and hosted models. Synchronoss Messaging features a distributed systems management console (messaging security, administration console for user and domain provisioning and management, integration with Nagios for monitoring and alerts) with support for smartphones, tablets and connected devices (support for leading protocols including iCal, CalDAV, CardDAV, EAS, IMAP/IDLE), Native Mobile App for iOS and Android for mail, contacts, calendar and task management.
OurSynchronoss’ products and platforms are designed to be carrier-grade, highly available, flexible and scalable, to enableenabling multiple converged communication services to be managed across multiplea range of distribution channels including e-commerce, m-commerce, telesales, customer stores, indirect and other retail outlets allowing usoutlets. This business model allows the Company to meet the rapidly changing and convergingconverged services and connected devices offered by ourtheir customers. OurSynchronoss’ products, platforms and solutions enable our Enterpriseits customers to acquire, retain and service subscribers and employees quickly, reliably and cost-effectively with white label and custom-branded solutions. OurSynchronoss’ customers can simplify the processes associated with managing the customer experience for procuring, activating, connecting, backing-up, synchronizing and enterprise-wide sharing/collaboration with connected devices and contents from these devices and associated services. The extensibility, scalability, reliability and relevance of ourthe Company’s platforms enable new revenue streams and retention opportunities for ourtheir customers through new subscriber acquisitions, sale of new devices, accessories and new value-added service offerings in the Cloud, while optimizingCloud. By using the Company’s technologies, Synchronoss’ customers can optimize their cost of operations andwhile enhancing their customer experience. We

The Company currently operateoperates in and market ourmarkets its solutions and services directly through ourits sales organizations in North America, Europe and Asia-Pacific.

Impacts of the Recent Novel Coronavirus (COVID-19)

This disclosure discusses the actions the Company has taken in response to the COVID-19 crisis and the impacts that the situation has had on our business, as well as related known or expected trends.

COVID-19 was identified in China in late 2019 and has since spread throughout the world, including throughout the United States (U.S.). COVID-19 has resulted in authorities implementing numerous preventative measures to contain or mitigate the outbreak of the virus, such as travel bans and restrictions, limitations on business activity, quarantines, and shelter-in-place orders.

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These restrictions and our responses to them are impacting our customers and their use of our products and services. In addition, governments have imposed a wide variety of consumer protection measures that limit how certain businesses, including TMT companies, can operate their businesses and interact with their customers. The crisis and governmental responses to the crisis have also resulted in a slowdown of global economic activity, which has impacted our customers. As a result, prior trends in our business may not be applicable to our operations during the pendency of the crisis.

The impact of COVID-19 for the remainder of the year and beyond will depend significantly on the duration and potential cyclicality of the health crisis and the related public policy actions, additional initiatives we undertake in response to employee, market or regulatory needs or demands, the length and severity of the global economic slowdown, and whether and how our customers change their behaviors over the longer term. As a result, the demand for our products and services, as well as our overall results of operations, may be materially and adversely impacted by the pandemic for the duration of 2020 or longer, and we are unable to predict the duration or degree of such impact with any certainty.

In response to COVID-19, we have been executing our business continuity plans and evolving our operations to protect the safety of our employees while continuing to provide critical products and services to our customers. Some of the initiatives the Company has undertaken include:

•Working with our customers to continue to provide our products and services through the pandemic
•Enhancing our safety protocols including moving the majority of our employees to remote work arrangements
•Adjusting business operations to address circumstances created by COVID-19
•Maintaining effective governance and internal controls in a remote work environment

As the crisis continues, we may revise our approach to these initiatives or take additional actions to meet the needs of our employees, customers and the Company and to continue to provide our products and services.

Revenues

We generate a substantial portionmajority of our revenues on a per-transactionper transaction or subscription basis, which is derived from contracts that extend up to 60 months from execution. For the three months ended September 30, 2016 and 2015, we derived approximately 66% and 73%, respectively, of our revenues from transactions processed and subscription arrangements.

Historically, our revenues have been directly impacted by the number of transactions processed.  The future success of our business depends on the continued growth of consumerBusiness-to-Business and businessBusiness-to-Business-to-Consumer driving customer transactions, and ascontinued expansion of our platforms into the TMT Market globally through Cloud, Messaging, Digital Transformation and Internet of Things (“IoT”) markets. As such, the volume of transactions that we process could fluctuateand our ability to expand our footprint in TMT and globally may result in revenue fluctuations on a quarterly basis.  See “Current Trends Affecting Our Results of Operations” for certain matters regarding future results of operations.

Most of our revenues are recorded in U.S. dollars but as we continue to expand our footprint with international carriers, and increase the extent of recording our international activities in local currencies, we will become subject to currency translation risk that could affect our future net sales as reported in U.S. dollars.

EachOur top five customers accounted for 69.6% and 67.9% of AT&Tnet revenues for the six months ended June 30, 2020 and June 30, 2019, respectively. Contracts with these customers typically run for three to five years. Of these customers, Verizon accounted for more than 10% of our revenues for the three months ended September 30, 2016in 2020 and 2015. AT&T and2019. The loss of Verizon in the aggregate accounted for 71% and 75% of our revenues for the three months ended September 30, 2016 and 2015, respectively. Our agreements with AT&T typically run three to five years and cover bothas a technology fee and exception handling services. Wecustomer would have a Master Services Agreement, with Statements of Work for each of the AT&T businesses which we support. Each of our agreements with Verizon typically have a similar duration, subject to a Master Services Agreement, with Statements of Work. See “Risk Factors” for certain matters bearing risksmaterial negative impact on our future resultscompany. However, we believe that the costs incurred and subscriber disruption by Verizon to replace Synchronoss’ solutions would be substantial.

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Current Trends Affecting Our Results of Operations

GrowthAs the full impact of the COVID-19 pandemic on our business continues to develop, we are actively monitoring the global situation. The extent of the impact of the COVID-19 pandemic on our operational and financial performance will depend on certain developments, including the duration and spread of the outbreak, impact on our customers and our sales cycles, impact on our business operations, impact on our customer, employee or industry events, and effect on our vendors, all of which are uncertain and cannot be predicted. The extent to which the COVID-19 pandemic may impact our business, financial condition or results of operations is uncertain, but may include, without limitation, impacts to our paying user growth as well as disruptions to our business operations as a result of travel restrictions, shutdown of workplaces and potential impacts to our vendors. Additionally, our results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates relative to U.S. dollars, our service providerreporting currency, as well as changes in interest rates. Volatile market conditions arising from the COVID-19 pandemic have and enterprise solutions are beingmay continue to negatively impact our results of operations and cash flows, due to a weakening of foreign currencies relative to the U.S. dollar, which may cause our revenues to decline relative to our costs.

Business from our Synchronoss Personal Cloud solution has been driven by the massive penetration and use of smart devices on a global basis. The following major trends drive our investment decisionsgrowth in acquisitions and development of product and solutions:
Activation. Service Provider consolidation continues in the US and Internationally. As CSP’s merge with MSOs and TV Providers there is an urgency provisioning new subscribers with devices and new value-add service bundles, while driving cost out of the business. Synchronoss Activation is poised to create new efficiencies in often underserved digital channels as a way to quickly provision combined subscriber bases and utilize traditionally underperforming and lower cost digital sales channels.

PersonalCloud. Shorter carrier customer contracts and lease programs have resulted in faster device upgrade cycles by customers resulting in increased device order transactions and activations. With mobile devices globally that are becoming content rich and acting as a replacement forrich. As these devices replace other traditional devices like PC’s,PCs, the ability to securely back up content from mobile devices, sync it with other devices and share it with others in their community of family, friends and business associates hashave become an essential need. The major Tier 1 carriers are also publicly discussing achieving 500% penetration (multiple connected devices per user) by enabling connectivity to non-traditional devices.needs and subscriber expectations.  Such devices include smartphones, connected cars, personal health and wellness devices and connected home.home devices. The need for these devices to be activated and managed and the contents from themof these devices to be stored in a common cloud are also expected to be drivers of our businessesbusiness in the longlonger term.
Business from our traditional Synchronoss Messaging business has been driven by a resurgence in the need for white label secure messaging platforms that favor the Mobile Network Operator’s (“MNO”) business objectives and are not beholden to the objectives of a sponsoring over-the-top (“OTT”) platform. We believe that messaging drives higher subscriber engagement than any other application in the market today and holds the potential to stimulate new revenue from traditional services and third-party brands.  OTT global success has driven MNOs to look at opportunities to preempt and compete with the OTTs which has potential opportunity for Synchronoss’ future growth to be driven by the need of TMT companies including (and especially) MNOs to embrace Messaging as a Platform (“MaaP”). MaaP will allow TMT and MNO’s to converse with subscribers in an efficient, automated way by streamlining the costs and increasing the effectiveness of self-care, as well as yielding cross-sell upselling of service plans, devices, bundles, etc.. The Synchronoss Advanced Messaging Platform provides state of the art RCS-driven features including the ability to support advanced Peer to Peer communications and introduce new revenue streams driven by commerce and advertising via Application-to-Person capabilities.
Companies in the TMT market all face the dilemma of attempting to pivot their businesses to digital execution in order to create experiences that meet the expectations of their subscribers, generate new revenues and streamline costs creating healthier margins at a faster time to market than they have ever operated before. Their challenges feature the lack of skill sets to conceptualize and run day to day digital operations and the lack of resources to integrate their legacy back end systems to enact digital experiences that achieve their business objectives. The growth of Synchronoss Digital Platforms will be driven by the ability to provide TMT companies’ desire to obtain digital transformation solutions as quickly as possible while educating them on the ability to operate a digital business efficiently. Our Platform as a Service (“PaaS”) model provides a desirable alternative to heavy capital expenditure spending options often tried internally. The ability for our platforms to create low/no code, new customer digital journeys, virtually on the fly, gives TMT Companies the ability to operate new experiences and businesses without heavily investing in development resources.
Synchronoss Advanced Messaging, Cloud products such as Personal Cloud, Mobile Content Transfer, Backup & Transfer and Out of Box Experience (OOBE)Digital Platforms are poised to respondbring IoT initiatives to this trendlife across MNO and TMT companies creating new use cases that will help stimulate the commercial growth of the robust potential of the IoT market. As new devices and sensors come online in connected cities, Synchronoss, partnering with white label,carriers like AT&T, has technology to unify and harness data from legacy systems; provide analytic insights that fuel automated communications, via our Advanced Messaging Platform between sensors, devices and people; and create a common storage reservoir with our secure Cloud.  There is opportunity in many areas of the IoT ecosystem for Synchronoss to support utilizing our Activation, Cloud and scalable products for mobile devices.

Secure Mobility. As Enterprise looks to increase productivity, it turns to mobile. Yet it finds itself confronted with the serious logistical challenges of not only managing stringent security requirements, but also accommodating the personal devices of its employees as a lower cost and more employee-friendly option. This trend of Bring Your Own Device (BYOD) is now prevalent enough that regulated industries are investigating new ways to merge Wall Street level regulated security and privacy with main stream usability standards of Facebook, Twitter, Slacker and other third party mobile services. Inherent in this challenge is managing multi-factor authentication, policy driven credential management and fraud protection as employees move in and out of “work” selves and “Home” selves – or even in, out or between companies. In addition to being able to manage different personas, the ability to create more productive work flows employing predictive analytics is taking on a higher value as a desirable function of a secure mobility platform. Our Secure Mobility platform enables Enterprise to pivot quickly into the regulated BYOD work environment and realize cost savings as well as productivity gains.Analytics tools.
 
Messaging. Messaging as a medium is moving beyond standard email. Messaging is fast becoming an interface for commerce. With the emergence
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Table of messaging giants such as What’s App, Line, Facebook and others, companies are using advanced messaging to create commerce opportunities to give subscribers visibility to smart transactions within a very sticky, high frequency environment. Chat bots, operating on AI fueled from semantic analysis of messaging content are the latest entrants to create a “messaging user interface” that is linking subscribers and third parties together across multiple channels. Service providers are not adopting new messaging clients to compete with highly competitive and viral Over the Top (OTT) players. Instead they are adopting monetization techniques used by those players to extend subscriber information into third party applications and chat interfaces creating stickier commerce opportunities. We are working closely with customers, especially in the Asia Pacific market, to evolve Service Provider messaging into a cloud-centric commerce offering utilizing personal cloud, identity management and other advanced messaging protocols that will open up new revenue streams and allow Operators to compete with OTT providers in new ways.Contents
To support our expected growth, which will be driven by thethese favorable industry trends mentioned above, we continue to look for opportunities to improve our operating efficiencies, such as the utilization of offshore technical and non-technical resources for our exception handling center management as well as routine software maintenance activities. We alsowill leverage modular components from our existing software platforms to build new products. We believe that these opportunities will continue to provide future benefits and position us to supportfor future revenue growth. In addition, we anticipate further automation of the transactions generated by our more mature customers and additional transaction types. Our cost of services can fluctuate from period to period based upon the level of automation and the on-boarding of new transaction and service types. We are also making investments in new research and development of new products designed to enable us to grow rapidly in the mobile wireless market. Our purchase of capital assets and equipment may also increase based on aggressive deployment, subscriber growth and promotional offers for free or bundled storage by our major Tier 1 carrier customers.
 
We continue to advanceexpand our plans forplatforms into the expansion of our platforms' footprint with broadband carriersconverging TMT, MNO, Digital and international mobile carriersIoT spaces to supportenable connected devices andto do more things across multiple networks, through our focus on transaction managementbrands and cloud-based services for back up, synchronization and sharing of content.communities. Our initiatives with AT&T, Verizon, WirelessSprint, British Telecom, Softbank and other CSPs continue to grow both with regard to our current businessesbusiness as well as our new products.product offerings. We are also exploring additional opportunities through merger and acquisition activities to support our customer, product and geographic diversification strategies.


Critical Accounting Policies and Estimates
The discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these consolidated financial statements in accordance with GAAP requires us to utilize accounting policies and make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingencies as of the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during a fiscal period. Although we believe that our judgments and estimates are appropriate, correct and reasonable under the circumstances, actual results may differ from those estimates.  If actual results or events differ materially from those contemplated by us in making these estimates, our reported financial condition and results of operations for future periods could be materially affected. See “Risk Factors” for certain matters bearing risks on our future results of operations.

We believe that of our significant accounting policies, which are described in Note 2 in our Annual Report on Form 10-K for the year ended December 31, 2015, the following accounting policies involve a greater degree of judgment and complexity. Accordingly, these are the policies which we believe are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of operations:
Revenue Recognition and Deferred Revenue
Allowance for Doubtful Accounts
Income Taxes
Goodwill
Noncontrolling interest
Investments in Affiliates and Other Entities
Business Combinations
Stock-Based Compensation
There were no significant changes in our critical accounting policies and estimates discussed in our Form 10-K during the nine months ended September 30, 2016.  Please refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2015 for a more complete discussion of our critical accounting policies and estimates.
Key Developments
On March 1, 2016, we acquired all outstanding shares of Openwave Messaging, Inc. for $124.5 million, net of working capital adjustments and liabilities assumed, comprised of $102.5 million paid in cash and $22 million paid in shares of our common stock, based upon the average market value of the common stock for the ten trading days prior to the acquisition date.
Openwave’s product portfolio includes its core complete messaging platform optimized for today’s most complex messaging requirements worldwide with a particular geographic strength in Asia Pacific. With this acquisition and combined with our current global footprint, we will have increased direct access to subscribers around the world for the Synchronoss Personal Cloud platform and bolster our go-to-market efforts internationally.

Results of Operations
Three months ended SeptemberJune 30, 20162020 compared to the three months ended SeptemberJune 30, 20152019

The following table presents an overview of our results of operations for the three months ended SeptemberJune 30, 20162020 and 2015:2019 (in thousands):
Three Months Ended June 30, 20202020 vs 2019
20202019$ Change 
Net revenues$76,535  $77,846  $(1,311) 
Cost of revenues*29,480  33,403  (3,923) 
Research and development19,096  19,026  70  
Selling, general and administrative24,640  23,080  1,560  
Restructuring charges4,493  356  4,137  
Depreciation and amortization10,284  20,269  (9,985) 
Total costs and expenses87,993  96,134  (8,141) 
Loss from continuing operations$(11,458) $(18,288) $6,830  

* Cost of revenues excludes depreciation and amortization which are shown separately.

 Three Months Ended September 30,  
 2016 2015 2016 vs 2015
 $ % of Revenue  $ % of Revenue  $ Change  % Change 
 (in thousands)
Net revenues$176,421
 100% $150,874
 100% $25,547
 17 %
Cost of services*77,230
 44% 63,438
 42% 13,792
 22 %
Research and development28,141
 16% 23,986
 16% 4,155
 17 %
Selling, general and administrative31,600
 18% 21,003
 14% 10,597
 50 %
Net change in contingent consideration obligation572
 —% —
 —% 572
 100 %
Restructuring charges977
 1% 399
 —% 578
 145 %
Depreciation and amortization24,692
 14% 19,754
 13% 4,938
 25 %
Total costs and expenses163,212
 93% 128,580
 85% 34,632
 27 %
Income from operations$13,209
 7% $22,294
 15% $(9,085) (41)%
*  Cost of services excludes depreciation and amortization which is shown separately.
Net revenues. Net revenues increased $25.5 decreased $1.3 million to $176.4$76.5 million for the three months ended SeptemberJune 30, 2016,2020, compared to the same period in 2015. Transaction2019. The decrease in revenue is primarily driven by the expiration of the STIN Cloud Telephony and subscriptionSupport services agreement and the sunset of certain legacy products offset by new commercial cloud and messaging agreements.

Cost of revenues as a percentage of sales were 66% or $117.1 decreased $3.9 million to $29.5 million for the three months ended SeptemberJune 30, 2016,2020, compared to 73% or $109.4 million for the same period in 2015.2019. The $7.72020 decrease was primarily due to cost savings initiatives implemented by the Company. These initiatives resulted in a significant decrease in cost of revenues driven mainly by data center consolidation and operating expense savings.

Research and development expense increased $0.1 million increase in transaction and subscription revenue is primarily driven by new subscription arrangements as a result of our expansion with new customers. Professional service and license revenues as a percentage of sales were 34% or $59.3to $19.1 million for the three months ended SeptemberJune 30, 2016,2020, compared to 27% or $41.5 million for the same period in 2015. The increase in professional services2019. Research and license revenue is primarily due to new license agreementsdevelopment remained relatively flat against the comparable period.

Selling, general and expansion of services with our customers.
Net revenues related to Activation Solutions decreased $0.3administrative expense increased $1.6 million to $74.5$24.6 million for the three months ended SeptemberJune 30, 2016,2020, compared to the same period in 2015. Net revenues2019. The 2020 increase was primarily driven by external costs related to Activation Solutions represented 42% for the three months ended September 30, 2016, compared to 50% for the same period in 2015. Net revenues related to our Cloud Solutions increased by $25.8outside consultants and legal fees.

Restructuring charges were $4.5 million to $101.9and $0.4 million for the three months ended SeptemberJune 30, 2016, compared to the same period in 2015. This increase in our Cloud Solutions performance was a result of new cloud offerings with existing customers as well as increased international sales. Net revenues related to our Cloud Solutions represented 58% for the three months ended September 30, 2016, compared to 50% for the same period in 2015.
Expenses
Cost of services. Cost of services increased $13.8 million to $77.2 million for the three months ended September 30, 2016, compared to the same period in 2015, due2020 and 2019, respectively, which primarily to increases in personnel and related costs, migration and integration of our acquired businesses. Personnel and related costs increased $5.0 million due to increased headcount from the Openwave acquisition and the launch of our Enterprise solution. Outside consulting expenses increased $5.7 million as a result of increased usage of third party exception handling vendors. Facility costs increased by $2.3 million which was primarily driven by increased costs for service contracts due to the expansion of our operational footprint.
Research and development. Research and development expense increased $4.2 million to $28.1 million for the three months ended September 30, 2016, compared to the same period in 2015 primarily due to an increase of $2.9 million in outside consultant expense which was driven by the launch of our Enterprise solution.

Selling, general and administrative.   Selling, general and administrative expense increased $10.6 million to $31.6 million for the three months ended September 30, 2016, compared to the same period in 2015. The increase was driven by a $3.7 million increase in personnel and related costs which were impacted by increased headcount due to the launch of our Enterprise solution and our Openwave acquisition. There was an increase in professional services of $1.9 million related to accounting and legal costs resulting from our acquisitions and tax planning efforts.  The remaining increase related to a $2.5 million increase in bad debt expense.
Net change in contingent consideration obligation.  The net change in contingent consideration obligation was an increase of $0.6 million for the three months ended September 30, 2016, as compared to the three months ended September 30, 2015. This was due to an increase in the probability of achieving the contractual milestones associated with the Razorsight earn-out. There was no contingent consideration balance for the three months ended September 30, 2015 due to the completion of all prior earn-out periods.
Restructuring charges. Restructuring charges were $1.0 million for the three months ended September 30, 2016, related to employment termination costs as a result of the work‑force reduction plan startedwork-force reductions initiated in March 2016the current year to reduce operating costs and align our resources with our key strategic priorities.

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Depreciation and amortization. Depreciation and amortization expense increased $4.9decreased $10.0 million to $24.7$10.3 million for the three months ended SeptemberJune 30, 2016,2020, compared to the same period in 2015. This2019. The 2020 decrease was primarily relatedattributable to the increaseexpiration of amortizable acquired assets in depreciable assets necessary forcombination with reduced capital expenditures mainly as a result of the continued expansion of our platforms anddata center consolidation efforts, partially offset by the increased amortization of our newly acquired intangible assets related to our recent acquisitions. capitalized software.

Interest income.  Interest income decreased $0.3 million to $0.3Income was $1.5 million for the three months ended SeptemberJune 30, 2016, compared2020. The interest income was primarily attributable to the same periodsettlement of the PIK note receivable, which resulted in 2015 due to a changereversal of past interest expenses incurred for tax purposes.

Income tax. The Company recognized approximately $8.0 million and $1.8 million in our portfolio allocations.

Interest expense.  Interest expense increased $0.1 million to $1.6 millionrelated income tax benefit during the three months ended June 30, 2020 and 2019, respectively. The effective tax rate was approximately 92.0% for the three months ended SeptemberJune 30, 2016, compared to2020. The effective tax rate was primarily driven by the same periodimpact of the redemption of the Company’s interest in 2015.
Other income (expense), net. Other income (expense) increased $0.9 million to $0.2 millionSTIN, the new NOL carryback provisions discussed above and valuation allowances recorded in domestic and foreign jurisdictions, partially offset by the impact of permanent book-tax differences. The Company’s effective tax rate was approximately 10.0% for the three months ended SeptemberJune 30, 2016, compared to the same period in 2015. Other income (expense) increased primarily due to a one-time $0.5 million benefit from the restructuring of specific facility leases.

Income tax.  We recognized approximately $6.9 million and $10.7 million in related income tax expenses during the three months ended September 30, 2016 and 2015, respectively. Our effective tax rate was approximately 59% for the three months ended September 30, 2016,2019, which was higherlower than ourthe U.S. federal statutory rate primarily due to the unfavorable impact of lossesvaluation allowance recorded in domestic and foreign jurisdictions which have loweroffset by certain jurisdictions projecting current tax rates than the U.S. and the unfavorable impactexpense.

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Discussion of the fair market value adjustment for the contingent consideration obligation related to the Razorsight earn-out. Our effective tax rate was approximately 53% for the threeCondensed Consolidated Statements of Operations

Six months ended SeptemberJune 30, 2015, which was higher than our U.S. federal statutory rate due to the unfavorable impact of losses in foreign jurisdictions, which have lower tax rates than the U.S. and the unfavorable impact of transaction costs related to the purchase of Razorsight, which are required to be capitalized for income tax purposes.


Nine months ended September 30, 20162020 compared to the ninesix months ended SeptemberJune 30, 20152019


The following table presents an overview of our results of operations for the ninesix months ended SeptemberJune 30, 20162020 and 2015:2019 (in thousands):

Six Months Ended June 30,2020 vs 2019
20202019$ Change 
Net revenues$153,657  $165,951  $(12,294) 
Cost of revenues*64,951  72,356  (7,405) 
Research and development38,884  38,707  177  
Selling, general and administrative50,984  52,326  (1,342) 
Restructuring charges5,943  777  5,166  
Depreciation and amortization21,640  40,412  (18,772) 
Total costs and expenses182,402  204,578  (22,176) 
Loss from continuing operations$(28,745) $(38,627) $9,882  

* Cost of revenues excludes depreciation and amortization which are shown separately.

 Nine Months Ended September 30,  
 2016 2015 2016 vs 2015
 $ % of Revenue  $ % of Revenue  $ Change  % Change 
 (in thousands)
Net revenues$476,658
 100% $421,620
 100% $55,038
 13 %
Cost of services*217,004
 46% 172,013
 41% 44,991
 26 %
Research and development78,408
 16% 68,472
 16% 9,936
 15 %
Selling, general and administrative89,799
 19% 60,603
 14% 29,196
 48 %
Net change in contingent consideration obligation7,299
 2% —
 —% 7,299
 100 %
Restructuring charges5,139
 1% 5,090
 1% 49
 1 %
Depreciation and amortization74,009
 16% 51,221
 12% 22,788
 44 %
Total costs and expenses471,658
 99% 357,399
 85% 114,259
 32 %
Income from operations$5,000
 1% $64,221
 15% $(59,221) (92)%
*  Cost of services excludes depreciation and amortization which is shown separately.
Net revenues.Net revenues increased $55.0 decreased $12.3 million to $476.7$153.7 million for the ninesix months ended SeptemberJune 30, 2016,2020, compared to the same period in 2015. Transaction and subscription revenues as a percentage of sales were 69% or $330.9 million for the nine months ended September 30, 2016 compared to 73% or $306.0 million for the same period2019. The decrease in 2015. The increase in transaction and subscription revenue is primarily driven by the expiration of the STIN Cloud Telephony and Support services agreement and the sunset of certain legacy products offset by new subscription arrangements as a resultcommercial cloud and messaging agreements.

Cost of our expansion with new customers.  Professional service and license revenues as a percentage of sales were 31% or $145.7 decreased $7.4 million to $65.0 million for the ninesix months ended SeptemberJune 30, 2016, compared to 27% or $115.6 million for the same period in 2015. The increase in professional services and license revenue is primarily due to new license agreements and expansion of services with our customers.
Net revenues related to Activation Solutions decreased $0.6 million to $202.0 million for the nine months ended September 30, 2016, compared tothe same period in 2015. Net revenues related to Activation Solutions represented 42% for the nine months ended September 30, 2016, compared to 48% for the same period in 2015. Net revenues related to our Cloud Solutions increased by $55.6 million to $274.7 million of our revenues for the nine months ended September 30, 20162020, compared to the same period in 2015.2019. The increase2020 decrease was primarily due to cost savings initiatives implemented by the Company. These initiatives resulted in our Cloud Solution performance was a resultsignificant decrease in cost of new cloud offerings with newrevenues driven mainly by data center consolidation and existing customers. Net revenues related to our Cloud Solutions represented 58% for the nine months ended September 30, 2016, compared to 52% for the same period in 2015.operating expense savings.

Expenses
Cost of services.  Cost of servicesResearch and development expense increased $45.0$0.2 million to $217.0$38.9 million for the ninesix months ended SeptemberJune 30, 2016,2020, compared to the same period in 2015, due primarily to increases in personnel and related costs, migration and integration of our acquired businesses. Personnel and related costs increased $11.0 million due to increased headcount from the Openwave acquisition and the launch of our Enterprise solution. Outside consulting expenses increased $15.3 million, of which $5.7 million of costs related to the launch of our Enterprise solution and increased usage of our third-party exception handling vendors. Facility costs increased by $16.3 million this was primarily driven by increased costs for service contracts due to the expansion of our operational footprint.
Research and development.2019. Research and development remained relatively flat against the comparable period.

Selling, general and administrativeexpense increased $9.9decreased $1.3 million to $78.4$51.0 million for the ninesix months ended SeptemberJune 30, 2016,2020, compared to the same period in 20152019. The 2020 decrease was primarily due to an increase of $11.1 million in outside consultant expense which was mostly driven by the launch of our Enterprise solution offset by a $1.1continued effort to streamline external costs related to outside consultants and legal fees.

Restructuring charges were $5.9 million decrease in personnel and related costs due to the capitalization of qualified software costs.

Selling, general and administrative.  Selling, general and administrative expense increased $29.2 million to $89.8$0.8 million for the ninesix months ended SeptemberJune 30, 2016, compared to the same period in 2015. The increase was driven in part by a $13.3 million increase in personnel2020 and related costs2019, respectively, which were driven by additional headcount due to the launch of our Enterprise solution and our Openwave acquisition. There was also a $4.5 million increase in outside consultants, of which the most significant increase related to costs incurred for the launch of our Enterprise solution. The remaining increases included $2.5 million related to facilities and $3.3 million related to increases in bad debt expense.
Net change in contingent consideration obligation.  The net change in contingent consideration obligation was a $7.3 million increase for the nine months ended September 30, 2016 as compared to the nine months ended September 30, 2015. This was due to an increase in the probability of achieving the contractual milestones associated with the Razorsight earn-out. There was no contingent consideration for the nine months ended September 30, 2015 due to the completion of all prior earn-out periods.
Restructuring charges. Restructuring charges were $5.1 million for the nine months ended September 30, 2016,primarily related to employment termination costs as a result of the work‑force reduction plan startedwork-force reductions initiated in March 2016the current year to reduce operating costs and align our resources with our key strategic priorities.

Depreciation and amortization. Depreciation and amortization expense increased $22.8decreased $18.8 million to $74.0$21.6 million for the ninesix months ended SeptemberJune 30, 2016,2020, compared to the same period in 2015,2019. The 2020 decrease was primarily relatedattributable to the increase in depreciableexpiration of amortizable acquired assets, necessary forpartially offset by the continued expansion of our platforms andincreased amortization of our newly acquired intangible assets related to our recent acquisitions.capitalized software.


Interest expense.  Interest expense increased $0.8 million to $5.0Income was $1.6 million for the ninesix months ended SeptemberJune 30, 2016, compared2020. The interest income was primarily attributable to the same periodsettlement of the PIK note receivable, which resulted in 2015 due to an increasea reversal of approximately $0.8 million related to the drawdown from the Amended Credit Facility.past interest expenses incurred for tax purposes.


Other income (expense), net.  Other income (expense) increased $0.4 million to $0.2 million for the nine months ended September 30, 2016, compared to the same period in 2015. Other income (expense) increased primarily due to a one-time $0.5 million benefit from the restructuring of specific facility leases.
Income tax.  WeThe Company recognized approximately $14.9$20.4 million and $25.5$3.2 million in related income tax expensebenefit during the ninesix months ended SeptemberJune 30, 20162020 and 2015,2019, respectively. OurThe effective tax rate was approximately 1,143%83.5% for the ninesix months ended SeptemberJune 30, 2016,2020, which was higherlower than ourthe U.S. federal statutory rate primarily due to pre-tax losses in jurisdictions where full valuation allowances have been recorded and in zero tax rate jurisdictions, offset by certain foreign jurisdictions projecting current income tax expense. In addition, during the second quarter, the Company recorded a $12.1 million U.S. federal current benefit as a discrete item related to the redemption of its partnership interest in STIN and the related settlement of certain trade receivables. The Company’s effective tax rate was approximately 8.2% for the six months ended June 30, 2019, which was lower than the U.S. federal statutory rate primarily due to the unfavorable impact of lossesvaluation allowance recorded in domestic and foreign jurisdictions which have loweroffset by certain jurisdictions projecting current tax rates than the U.S., the unfavorable impactexpense.

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Table of the fair market value adjustment for the Razorsight contingent consideration obligation and the recording of a non-cash income tax provision to establish a valuation allowance. We considered all available evidence, including our historical profitability and projections of future taxable income together with new evidence, both positive and negative, that could affect the view of the future realization of deferred tax assets. As a result of our assessment, we recorded a $2.9 million valuation allowance which reduced the deferred tax asset related to our current net operating losses of certain foreign subsidiaries. Our effective tax rate was approximately 42% for the nine months ended September 30, 2015, which was higher than our U.S. federal statutory rate due to the unfavorable impact of losses in foreign jurisdictions We review the expected annual effective income tax rate and make changes on a quarterly basis as necessary based on certain factors such as changes in forecasted annual operating income, changes to the actual and forecasted permanent book-to-tax differences, and changes resulting from the impact of tax law changes.Contents

Liquidity and Capital Resources

OurAs of June 30, 2020, our principal sourcesources of liquidity hashave been cash provided by operations and borrowings oncapital from our Credit Facility.revolving credit facility. Our cash, cash equivalents, and marketable securities and restricted cash balance was $144.3$42.8 million at SeptemberJune 30, 2016,2020. Subsequent to June 30, 2020, the Company received a decrease$13.4 million tax refund for the carryback claim filed in the second quarter of $89.4 million as compared2020.For further details, see Note15. Subsequent Events of the Notes to the balance at December 31, 2015. This decrease was primarily due to our acquisitionCondensed Consolidated Financial Statements in Item 1 of Openwave, the unfavorable timing of collections, purchases of fixed assets and repurchases of outstanding common stock under the Board approved repurchase program. This was offset by borrowings under the Credit Facility and cash provided by operations. this Form 10-Q.

We anticipate that our principal uses of cash, in the futurecash equivalents, and marketable securities will be to fund the expansion of our business through both organic growth as well as possible acquisition activities and the expansion of our customer base. Uses of cash will also include facility and technology expansion, capital expenditures, and working capital.


At SeptemberJune 30, 2016,2020, our non-U.S. subsidiaries held approximately $25.0$6.0 million of cash and cash equivalents that are available for use by all of our operations around the world. At this time, we believe the funds held by all non-U.S. subsidiaries except those acquired as part of the Openwave acquisition, will be permanently reinvested outside of the U.S. However, if these funds were repatriated to the U.S. or used for U.S. operations, certain amounts could be subject to U.S. tax for the incremental amount in excess of the foreign tax paid. Due to the timing and circumstances of repatriation of suchthese earnings, if any, it is not practical to determine the unrecognized deferred tax liability related to the amount.
Credit Facility
In September 2013, we entered into a Credit Agreement (the “Credit Facility”) with JP Morgan Chase Bank, N.A., as the administrative agent, Wells Fargo Bank, National Association, as the syndication agent and Capital One, National Association and KeyBank National Association, as co-documentation agents.  The Credit Facility, which was used for general corporate purposes, was a $100 million unsecured revolving line of credit that matures on September 27, 2018.  We paid a commitment fee in the range of 25 to 35 basis points on the unused balance of the revolving credit facility under the Credit Agreement. We had the right to request an increase in the aggregate principal amount of the Credit Facility to $150 million. 

Interest on the borrowing were based upon LIBOR plus a 2.25 basis point margin. All outstanding balances under the Credit Facility were repaid on July 7, 2016 and the Credit Facility was terminated and replaced with the Amended Credit Facility.

Amended Credit Facility

On July 7, 2016, we entered into an Amended and Restated Credit Agreement (the “Credit Agreement”) with Wells Fargo Bank, National Association, as administrative agent (the “Administrative Agent”) and the several lenders party thereto (the “Amended Credit Facility”). The Amended Credit Facility, which will be used for general corporate purposes, is a $250 million unsecured revolving line of credit that matures on July 7, 2021, subject to terms and conditions set forth therein.  We pay a commitment fee in the range of 15 to 30 basis points on the unused balance of the revolving credit facility under the Credit Agreement. We have the right to request an increase in the aggregate principal amount of the Amended Credit Facility to $350 million.

Interest on the borrowing was based upon LIBOR plus a 1.99 basis point margin. As of September 30, 2016, we have an outstanding balance of $38 million on our Amended Credit Facility.
The Amended Credit Facility is subject to certain financial covenants. As of September 30, 2016, we were in compliance with all required covenants.

Convertible Senior Notes
On August 12, 2014, we issued $230.0 million aggregate principal amount of 0.75% Convertible Senior Notes due in 2019 (the “2019 Notes”). The 2019 Notes mature on August 15, 2019, and bear interest at a rate of 0.75% per annum payable semi-annually in arrears on February 15 and August 15 of each year. We accounted for the $230 million face value of the debt as a liability and capitalized approximately $7.1 million of financing fees, related to the issuance. At September 30, 2016, the carrying amount of the liability was $225.9 million and the outstanding principal of the 2019 Notes was $230.0 million, with an effective interest rate of approximately 1.39%.

Share Repurchase Program
On February 4, 2016, we announced that our Board of Directors approved a share repurchase program under which we may repurchase up to $100 million of our outstanding common stock. We plan to make such purchases at prevailing prices over the next 12 to 18 months.

As of September 30, 2016, we repurchased approximately 1.3 million shares of our common stock for $40.0 million in connection with our existing share repurchase program.


Discussion of Cash Flows
A summary of net cash flows follows (in thousands):
 Nine Months Ended September 30,
 2016 2015
Net cash provided by (used in):  (As adjusted)
Operating activities$56,484
 $76,574
Investing activities(80,479) (168,700)
Financing activities(1,915) (3,058)

Cash flows from operations. Net cash provided by operating activities for the nine months ended September 30, 2016 was $56.5 million, as compared to $76.6 million for the same period in 2015. Cash flows from operations decreased by approximately $20.1 million and was primarily impacted by the increased levels of net working capital, specifically, the unfavorable timing of collections.
Cash flows from investing. Net cash used in investing activities for the nine months ended September 30, 2016 was $80.5 million, as compared to $168.7 million used for the same period in 2015. The decrease of approximately $88.2 million was primarily due to decreased purchases of marketable securities.
Cash flows from financing. Net cash used in financing activities for the nine months ended September 30, 2016 was $1.9 million, as compared to $3.1 million used by financing activities for the same period in 2015. The decrease in net cash used in financing activities for the nine months ended September 30, 2016 of $1.1 million as compared to 2015 was primarily due to higher net borrowings of $38 million offset by share repurchases of $40 million.

We believe that our existing cash, and cash equivalents, credit facility, and our ability to manage working capital and expected positive cash flows generated from our existing operations our available credit facilities and other available sources of financingin combination with continued expense reductions will be sufficient to fund our operations for the next twelve months from the date of filing based on our current business plans. However, as the impact of the COVID-19 pandemic on the economy and our operations evolves, we will continue to assess our liquidity needs. Given the economic uncertainty as a result of the pandemic, we have taken actions to improve our current liquidity position, including, reducing working capital, reducing operating costs and substantially reducing discretionary spending. Even with these actions however, an extended period of economic disruption as a result of COVID-19 could materially affect our business, results of operations, ability to meet debt covenants, access to sources of liquidity and financial condition. Our liquidity plans are subject to a number of risks and uncertainties, including those described in the "Forward-Looking Statements" section of this MD&A and Part I, Item 1A. “Risk Factors”, some of which are outside of our control.

Revolving Credit Facility

In the first quarter of fiscal 2020, the Company drew the $10.0 million from our Revolving Credit Facility. For further details, see Note7. Debt of the Notes to Condensed Consolidated Financial Statements in Item 1 of this Form 10-Q.

Share Repurchase Program

There were no repurchases in 2020.

Shares of Preferred Stock

In accordance with the terms of the Share Purchase Agreement dated as of October 17, 2017 (the “PIPE Purchase Agreement”), with Silver Private Holdings I, LLC, an affiliate of Siris (“Silver”), on February 15, 2018, we issued to Silver 185,000 shares of our newly issued Series A Preferred Stock, par value $0.0001 per share, with an initial liquidation preference of $1,000 per share, in exchange for $97.7 million in cash and the transfer from Silver to us of the 5,994,667 shares of our common stock held by Silver (the “Preferred Transaction”). In connection with the issuance of the Series A Preferred Stock, we (i) filed the Series A Certificate and (ii) entered into an Investor Rights Agreement with Silver setting forth certain registration, governance and preemptive rights of Silver with respect to us (the “Investor Rights Agreement”). Pursuant to the PIPE Purchase Agreement, at the closing, we paid to Siris $5.0 million as a reimbursement of Silver’s reasonable costs and expenses incurred in connection with the Preferred Transaction.

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Certificate of Designation of the Series A Preferred Stock

The rights, preferences, privileges, qualifications, restrictions and limitations of the shares of Series A Preferred Stock are set forth in the Series A Certificate. Under the Series A Certificate, the holders of the Series A Preferred Stock are entitled to receive Preferred Dividends. The Preferred Dividends are due on each Series A Dividend Payment Date. We may choose to pay the Preferred Dividends in cash or in additional shares of Series A Preferred Stock. In the event we do not declare and pay a dividend in-kind or in cash on any Series A Dividend Payment Date, the unpaid amount of the Preferred Dividend will be added to the Liquidation Preference. In addition, the Series A Preferred Stock participates in dividends declared and paid on shares of our common stock.

Each share of Series A Preferred Stock is convertible, at the option of the holder, into the number of shares of common stock equal to the “Conversion Price” (as that term is defined in the Series A Certificate) multiplied by the then applicable “Conversion Rate” (as that term is defined in the Series A Certificate). Each share of Series A Preferred Stock is initially convertible into 55.5556 shares of common stock, representing an initial “conversion price” of approximately $18.00 per share of common stock. The Conversion Rate is subject to equitable proportionate adjustment in the event of stock splits, recapitalizations and other events set forth in the Series A Certificate.

On and after February 15, 2023, holders of shares of Series A Preferred Stock have the right to cause the Company to redeem each share of Series A Preferred Stock for cash in an amount equal to the sum of the current liquidation preference and any accrued dividends. Each share of Series A Preferred Stock is also redeemable at the option of the holder upon the occurrence of a “Fundamental Change” (as that term is defined in the Series A Certificate) at a specified premium (“Liquidation Value”). In addition, the Company is also permitted to redeem all outstanding shares of the Series A Preferred Stock at any time (i) within the first 30 months of the date of issuance for the sum of the then-applicable Liquidation Preference, accrued but unpaid dividends and a make whole amount (known as “Redemption Value”) and (ii) following the 30-month anniversary of the date of issuance for the sum of the then-applicable Liquidation Preference and the accrued but unpaid dividends. As of June 30, 2020, the Liquidation Value and Redemption Value of the Preferred Shares was $243.1 million.

The holders of a majority of the Series A Preferred Stock, voting separately as a class, are entitled at each of our annual meetings of stockholders or at any special meeting called for the purpose of electing directors (or by written consent signed by the holders of a majority of the then-outstanding shares of Series A Preferred Stock in lieu of such a meeting): (i) to nominate and elect two members of our Board of Directors for so long as the Preferred Percentage (as defined in the Series A Certificate) is equal to or greater than 10%; and (ii) to nominate and elect one member of our Board of Directors for so long as the Preferred Percentage is equal to or greater than 5% but less than 10%.

For so long as the holders of shares of Series A Preferred Stock have the right to nominate at least one director, we are required to obtain the prior approval of Silver prior to taking certain actions, including: (i) certain dividends, repayments and redemptions; (ii) any amendment to our certificate of incorporation that adversely effects the rights, preferences, privileges or voting powers of the Series A Preferred Stock; (iii) issuances of stock ranking senior or equivalent to shares of Series A Preferred Stock (including additional shares of Series A Preferred Stock) in the priority of payment of dividends or in the distribution of assets upon any liquidation, dissolution or winding up of us; (iv) changes in the size of our Board of Directors; (v) any amendment, alteration, modification or repeal of the charter of our Nominating and Corporate Governance Committee of the Board of Directors and related documents; and (vi) any change in our principal business or the entry into any line of business outside of our existing lines of businesses. In addition, in the event that we are in EBITDA Non-Compliance (as defined in the Series A Certificate) or the undertaking of certain actions would result in us exceeding a specified pro forma leverage ratio, then the prior approval of Silver would be required to incur indebtedness (or alter any debt document) in excess of $10.0 million, enter or consummate any transaction where the fair market value exceeds $5.0 million individually or $10.0 million in the aggregate in a fiscal year or authorize or commit to capital expenditures in excess of $25.0 million in a fiscal year.

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Each holder of Series A Preferred Stock has one vote per share on any matter on which holders of Series A Preferred Stock are entitled to vote separately as a class, whether at a meeting or by written consent. The holders of Series A Preferred Stock are permitted to take any action or consent to any action with respect to such rights without a meeting by delivering a consent in writing or electronic transmission of the holders of the Series A Preferred Stock entitled to cast not less than the minimum number of votes that would be necessary to authorize, take or consent to such action at a meeting of stockholders. In addition to any vote (or action taken by written consent) of the holders of the shares of Series A Preferred Stock as a separate class provided for in the Series A Certificate or by the General Corporation Law of the State of Delaware, the holders of shares of the Series A Preferred Stock are entitled to vote with the holders of shares of common stock (and any other class or series that may similarly be entitled to vote on an as-converted basis with the holders of common stock) on all matters submitted to a vote or to the consent of the stockholders of the Company (including the election of directors) as one class.

Under the Series A Certificate, if Silver and certain of its affiliates have elected to effect a conversion of some or all of their shares of Series A Preferred Stock and if the sum, without duplication, of (i) the aggregate number of shares of our common stock issued to such holders upon such conversion and any shares of our common stock previously issued to such holders upon conversion of Series A Preferred Stock and then held by such holders, plus (ii) the number of shares of our common stock underlying shares of Series A Preferred Stock that would be held at such time by such holders (after giving effect to such conversion), would exceed the 19.9% of the issued and outstanding shares of our voting stock on an as converted basis (the “Conversion Cap”), then such holders would only be entitled to convert such number of shares as would result in the sum of clauses (i) and (ii) (after giving effect to such conversion) being equal to the Conversion Cap (after giving effect to any such limitation on conversion). Any shares of Series A Preferred Stock which a holder has elected to convert but which, by reason of the previous sentence, are not so converted, will be treated as if the holder had not made such election to convert and such shares of Series A Preferred Stock will remain outstanding. Also, under the Series A Certificate, if the sum, without duplication, of (i) the aggregate voting power of the shares previously issued to Silver and certain of its affiliates held by such holders at the record date, plus (ii) the aggregate voting power of the shares of Series A Preferred Stock held by such holders as of such record date, would exceed 19.99% of the total voting power of our outstanding voting stock at such record date, then, with respect to such shares, Silver and certain of its affiliates are only entitled to cast a number of votes equal to 19.99% of such total voting power. The limitation on conversion and voting ceases to apply upon receipt of the requisite approval of holders of our common stock under the applicable listing standards.

Investor Rights Agreement
Concurrently with the closing of the Preferred Transaction, Synchronoss and Silver entered into an Investor Rights Agreement. Under the terms of the Investor Rights Agreement, Silver and Synchronoss have agreed that, effective as of the closing of the Preferred Transaction, the Board of Directors of Synchronoss will consist of ten members. From and after the closing of the Preferred Transaction, so long as the holders of Series A Preferred Stock have the right to nominate a member to the Board of Directors pursuant to the Series A Certificate, the Board of Directors of Synchronoss will consist of (i) two directors nominated and elected by the holders of shares of Series A Preferred Stock; (ii) four directors who meet the independence criteria set forth in the applicable listing standards (each of whom will be initially agreed upon by Synchronoss and Silver); and (iii) four other directors, two of whom shall satisfy the independence criteria of the applicable listing standards and, as of the closing of the Preferred Transaction, one of whom shall be the individual then serving as chief executive officer of Synchronoss and one of whom shall be the current chairman of the Board of Directors of Synchronoss as of the date of execution of the Investors Rights Agreement. Following the closing of the Preferred Transaction, so long as the holders of Series A Preferred Stock have the right to nominate at least one director to the Board of Directors of Synchronoss pursuant to the Series A Certificate, Silver will have the right to designate two members of the Nominating and Corporate Governance Committee of the Board of Directors.

Pursuant to the terms of the Investor Rights Agreement, neither Silver nor its affiliates may transfer any shares of Series A Preferred Stock subject to certain exceptions (including transfers to affiliates that agree to be bound by the terms of the Investor Rights Agreement).

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For so long as Silver has the right to appoint a director to the Board of Directors of Synchronoss, without the prior approval by a majority of directors voting who are not appointed by the holders of shares of Series A Preferred Stock, neither Silver nor its affiliates will directly or indirectly purchase or acquire any debt or equity securities of Synchronoss (including equity-linked derivative securities) if such purchase or acquisition would result in Silver’s Standstill Percentage (as defined in the Investor Rights Agreement) being in excess of 30%. However, the foregoing standstill restrictions would not prohibit the purchase of shares pursuant to the PIPE Purchase Agreement or the receipt of shares of Series A Preferred Stock issued as Preferred Dividends pursuant to the Series A Certificate, shares of Common Stock received upon conversion of shares of Series A Preferred Stock or receipt of any shares of Series A Preferred Stock, Common Stock or other securities of the Company otherwise paid as dividends or as an increase of the Liquidation Preference (as defined in the Series A Certificate) or distributions thereon. Silver will also have preemptive rights with respect to issuances of securities of Synchronoss in order to maintain its ownership percentage.

Under the terms of the Investor Rights Agreement, Silver will be entitled to (i) three demand registrations, with no more than two demand registrations in any single calendar year and provided that each demand registration must include at least 10% of the shares of Common Stock held by Silver, including shares of Common Stock issuable upon conversion of shares of Series A Preferred Stock and (ii) unlimited piggyback registration rights with respect to primary issuances and all other issuances.

Discussion of Cash Flows

A summary of net cash flows follows (in thousands):
Six Months Ended June 30,Change
202020192020 vs 2019
Net cash provided by (used in):
Operating activities$1,608  $18,564  $(16,956) 
Investing activities(6,934) (20,250) 13,316  
Financing activities9,991  (73,574) 83,565  

Our primary source of cash is receipts from revenue. The primary uses of cash are personnel and related costs, telecommunications and facility costs related primarily to our cost of revenue and general operating expenses including professional service fees, consulting fees, building and equipment maintenance and marketing expense.

Cash flows from operating activities for the six months ended June 30, 2020 was $1.6 million cash provided by operating activities, as compared to $18.6 million of cash used in operating activities for the same period in 2019. The decrease of cash used by operating activities of $17.0 million was primarily due to a significant tax refund received in the prior year.

Cash flows from investingfor the six months ended June 30, 2020 was $6.9 million cash used for investing, as compared to $20.3 million in cash used in investing activities during the same period in 2019. The cash used for investing in the current year was primarily related to the purchase of fixed assets and investment in capitalized software offset by the sale of certain IP address assets. The net decrease in cash from investing activities from the prior year mainly related to the net proceeds from the purchases and sales of marketable securities in the prior year that were not present in the current period.

Cash flows from financing for six months ended June 30, 2020 was $10.0 million of cash provided, as compared to $73.6 million of cash used by financing activities for the same period in 2019. The cash provided from investing activities was attributable to the $10.0 million drawdown from our Revolving Credit Facility in the current quarter. The net change in cash provided from financing activities from the prior year is primarily attributable to the cash provided from the Revolving Credit Facility offset by repayments for our Convertible Senior Notes in 2019.

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Effect of Inflation

Although inflation generally affects us by increasing our cost of labor and equipment, we do not believe that inflation has had any material effect on our results of operations during 2020 and 2019. We do not expect the current rate of inflation to have a material impact on our business.

Contractual Obligations
Our contractual obligations consist of contingent consideration, office equipment and colocation services and contractual commitments under third-party hosting, software licenses and maintenance agreements. The following table summarizes our long-term contractual obligations as of June 30, 2020 (in thousands).
Payments Due by Period
Total20202021-20232024-2025Thereafter
Capital lease obligations$62  $8  $49  $5  $—  
Revolving Credit Facility$10,000  $10,000  $—  $—  $—  
Interest—  —  —  —  —  
Operating lease obligations83,044  6,743  34,526  18,852  22,923  
Purchase obligations*24,976  17,541  7,435  —  —  
Total$118,082  $34,292  $42,010  $18,857  $22,923  

* Amount represents obligations associated with colocation agreements and other customer delivery related purchase obligations.

Uncertain Tax Positions

Unrecognized tax positions of $3.5 million at June 30, 2020 are excluded from the table above as we are not able to reasonably estimate when we would make any cash payments required to settle these liabilities, but we do not believe that the ultimate settlement of our obligations will materially affect our liquidity. We do not expect that the balance of unrecognized tax benefits will significantly increase or decrease over the next twelve months.

Critical Accounting Policies and Estimates

Our condensed consolidated financial statements and accompanying notes have been prepared in accordance with U.S. GAAP. The preparation of these condensed consolidated financial statements in accordance with U.S. GAAP requires us to utilize accounting policies and make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingencies as of the date of the financial statements and the reported amounts of revenues and expenses during a fiscal period. The SEC considers an accounting policy to be critical if it is important to a company’s financial condition and results of operations, and if it requires significant judgment and estimates on the part of management in its application.

These estimates and assumptions take into account historical and forward looking factors that the Company believes are reasonable, including but not limited to the potential impacts arising from COVID-19 and public and private sector policies and initiatives aimed at reducing its transmission. As the extent and duration of the impacts from COVID-19 remain unclear, the Company’s estimates and assumptions may evolve as conditions change. Actual results could differ significantly from those estimates. If actual results or events differ materially from those contemplated by us in making these estimates, our reported financial condition and results of operations for future periods could be materially affected. See Part II, “Item 1A. Risk Factors” in this Form 10-Q for certain matters bearing risks on our future results of operations.

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During the six months ended June 30, 2020, the Company made changes in its accounting policies over Accounting Standards Update No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. These updates are described in detail in Note2. Basis of Presentation and Consolidation. Aside from the adoption of Topic 326, there were no significant changes in our critical accounting policies and estimates discussed in our Form 10-K for the nineyear ended December 31, 2019 during the six months ended SeptemberJune 30, 2016 or 2015. 2020.  Please refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2019 for a more complete discussion of our critical accounting policies and estimates.


Impact of Recently Issued Accounting Standards

In August 2016, the Financial Account Standards Board (“FASB”)For a discussion of recently issued Accounting Standards Update (“ASU”) 2016-15, “Statementaccounting standards see Note2. Basis of Cash Flows” (“ASU 2016-15). This new guidance will make eight targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for fiscal years beginning after December 15, 2017. ASU 2016-15 will require adoption on a retrospective basis unless it is impracticable to apply, in which case we would be required to apply the amendments prospectively as of the earliest date practicable. Management is currently evaluating the impact of ASU 2016-15 on our condensed consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers,” which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. In March 2016, the FASB issued ASU 2016-08, “Principal versus Agent Considerations (Reporting Revenue Gross versus Net),” which clarifies the guidance in determining revenue recognition as principal versus agent. In April 2016, the FASB issued ASU 2016-10, “Identifying Performance Obligations and Licensing,” which provides guidance in accounting for immaterial performance obligations and shipping and handling. In May 2016, the FASB issued ASU 2016-12, “Narrow-Scope Improvements and Practical Expedients” which provides clarification on assessing the collectability criterion, presentation of sales taxes, measurement date for noncash consideration and completed contracts at transition. This ASU also provides a practical expedient for contract modifications. The new standards are effective for public reporting companies for interim and annual periods beginning after December 15, 2017. Management is currently evaluating the effect that these ASUs will have on our consolidated financial statements and related disclosures. Management has not yet selected a transition method nor has it determined the effect of these standards on our ongoing financial reporting.

Impact of New Accounting Pronouncements
In March, 2016, the FASB released Accounting Standards Update (“ASU”) 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” The ASU includes multiple provisions intended to simplify various aspects of the accounting for share-based payments. While aimed at reducing the cost and complexity of the accounting for share-based payments, the amendments may significantly impact net income, earnings per share, and the statement of cash flows. The ASU is effective for public companies in annual periods beginning after December 15, 2016, and interim periods within those years. Management elected to early adopt this standard in the second quarter ended June 30, 2016.
ASU 2016-09 eliminates the requirement to estimate and apply a forfeiture rate to reduce stock compensation expense during the vesting period and, instead, account for forfeitures as they occur. ASU 2016-09 requires that this change be adopted using the modified retrospective approach. As such, we recorded a cumulative-effect adjustment of $1.0 million to adjust our retained earnings.
Under ASU 2016-09, excess tax benefits related to employee share-based payments are not reclassified from operating activities to financing activities in the statement of cash flows. We applied the effect of ASU 2016-09 to the presentation of excess tax benefits in the statement of cash flows, retrospectively. This change increased the net cash provided by operating activities and decreased net cash provided by financing activities by $4.7 million for the nine months ended September 30, 2015.
Under ASU 2016-09, cash paid when withholding shares for tax withholding purposes are classified as a financing activity in the statement of cash flows. ASU 2016-09 requires that this change be adopted retrospectively. The presentation requirements for cash flows related to employee taxes paid for withheld shares increased the net cash provided by operating activities and decreased net cash provided by financing activities by $15.5 million for the nine months ended September 30, 2015.
ASU 2016-09 eliminates additional paid in capital ("APIC") pools and requires excess tax benefits and tax deficiencies to be recorded in the income statement when the awards vest or are settled. This decreased our effective tax rate for the three months ended September 30, 2016 by 2% and increased our effective tax rate by 51% for the nine months ended September 30, 2016. The ASU requires that this change be adopted prospectively. We excluded the excess tax benefits from the assumed proceeds available to repurchase shares in our computation of diluted earnings per share for the three months ended September 30, 2016. This increased our diluted weighted average common shares outstanding by 43,762 shares and decreased the diluted weighted average common shares outstanding by 121,041 for the three and nine months ended September 30, 2016, respectively.
ASU 2016-09 eliminates the requirement that excess tax benefits be realized (i.e., through a reduction in income taxes payable) before they can be recognized. Previously unrecognized deferred tax assets were recognized on a modified retrospective basis which resulted in a cumulative-effect adjustment to our retained earnings of $0.5 million.
Adoption of the new standard impacted our previously reported quarterly results as follows: 
 Three Months Ended March 31, 2016,
 As reported As adjusted
Income statement: 
  
Provision for income taxes$(3,965) $(4,588)
Cash flows statement: 
  
Net cash from operations$37,731
 $40,489
Net cash used in financing(35,253) (32,495)
Balance sheet: 
  
Deferred tax liability$23,096
 $22,864
Additional paid-in capital535,326
 536,659
Retained earnings194,012
 192,911

Management adopted ASU 2015-03, “Interest- Imputation of Interest (subtopic 835-30); Simplifying the Presentation of Debt Issuance Costs, and ASU 2015-15, Presentation and Subsequent MeasurementConsolidation included in Part I, Item 1. “Notes to Condensed Consolidated Financial Statements (unaudited)” of Debt Issuance Costs Associate with Line of Credit Arrangements, during the first quarter of 2016, concurrently. The adoption of these ASUs required us to reclassify the deferred financing costs associated with our Convertible Senior Notes from other assets to long-term debtthis Quarterly Report on a retrospective basis. Our consolidated balance sheets included deferred financing costs of $4.1 million and $5.1 million as of September 30, 2016 and December 31, 2015, respectively, which were reclassified from other assets to long-term debt. The debt issuance costs associated with our Credit Facility and Amended Credit Facility continue to be presented in other assets on the condensed consolidated balance sheets.Form 10-Q.


Off-Balance Sheet Arrangements

We had no off-balance sheet arrangements as of SeptemberJune 30, 20162020 and December 31, 20152019 that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our interests.investors.



ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk

In additionThe following discussion about market risk disclosures involves forward-looking statements. Actual results could differ materially from those projected in the forward-looking statements. We deposit our excess cash in what we believe are high-quality financial instruments, primarily money market funds and certificates of deposit and, we may be exposed to market risks related to changes in interest rates. We do not actively manage the other information set forthrisk of interest rate fluctuations on our marketable securities; however, such risk is mitigated by the relatively short-term nature of these investments. These investments are denominated in this report, you should carefully consider the factors discussed in Part II, “Item 7A. Quantitative and Qualitative Disclosures about Market Risk” inUnited States dollars.

The primary objective of our Annual Report on Form 10-Kinvestment activities is to preserve our capital for the year endedpurpose of funding operations, while at the same time maximizing the income, we receive from our investments without significantly increasing risk. To achieve these objectives, our investment policy allows us to maintain a portfolio of cash equivalents and short- and long-term investments in a variety of securities, which could include commercial paper, money market funds and corporate and government debt securities. Our cash, cash equivalents and marketable securities at June 30, 2020 and December 31, 2015, which could materially affect our business, financial condition or future results. We believe our exposure associated with these2019 were invested in liquid money market risks has not changed materially since December 31, 2015.accounts, certificates of deposit and government securities. All market-risk sensitive instruments were entered into for non-trading purposes.

Foreign Currency Exchange Risk

We are exposed to translation risk because certain of our foreign operations utilize the local currency as their functional currency and those financial results must be translated into U.SU.S. dollars. As currency exchange rates fluctuate, translation of the financial statements of foreign businesses into U.S. dollars affects the comparability of financial results between years.


We do not hold any derivative instruments and do not engage in any hedging activities. Although our reporting currency is the U.S. dollar, we may conduct business and incur costs in the local currencies of other countries in which we may operate, make sales and buy materials and services. As a result, we are subject to foreign currency translationtransaction risk. Further, changes in exchange rates between foreign currencies and the U.S. dollar could affect our future net sales, cost of sales and expenses and could result in exchangeforeign currency transaction gains or losses.

We cannot accurately predict future exchange rates or the overall impact of future exchange rate fluctuations on our business, results of operations and financial condition. To the extent that our international activities recorded in local currencies
42
increase in the future, our exposure to fluctuations in currency exchange rates will correspondingly increase and hedging activities may be considered if appropriate.

Interest Rate Risk

We are exposed to the risk of interest rate fluctuations on the interest income earned on our cash and cash equivalents. A hypothetical 100 basis point movement in interest rates applicable to our cash and cash equivalents outstanding at SeptemberJune 30, 20162020 would increase interest income by less than $0.5approximately $0.4 million on an annual basis.
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Borrowings under our credit facility, are at variable rates
Based on our outstanding borrowings at September 30, 2016, a one-percentage point change in interest rates would have affected interest expense on the debt by $0.4 million on an annualized basis.


ITEM 4.  CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures.Procedures

Under the supervision and with the participation of our management, including ourOur Chief Executive Officer and our Chief Financial Officer wehave evaluated the effectiveness of the design and operation of ourregistrant’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) underof the Securities Exchange Act of 1934,1934), as amended) as of September 30, 2016. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective as of September 30, 2016, the end of the period covered by this quarterly report, tothat ensure that information relating to the informationregistrant which is required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, arethis report is recorded, processed, summarized and reported within therequired time periods specifiedusing the criteria for effective internal control established in Internal Control-Integrated Framework issued by the rules and formsCommittee of Sponsoring Organizations of the Securities and ExchangeTreadway Commission and that such information is accumulated and communicated to our management, includingin 2013. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that the registrant’s disclosure controls and procedures were effective as appropriate to allow timely decisions regarding required disclosures.of June 30, 2020.

Changes in Internal Control Over Financial Reporting

We completed an implementation of a new enterprise resource planning, or ERP, system during the first quarter of 2020. The ERP system replaced or enhanced certain internal controlsfinancial, operating and other systems that are critical to our business operations. The ERP implementation affected the processes that constitute our internal control over financial reportingreporting. Management has taken steps to ensure that appropriate controls were designed and implemented as the new ERP system was implemented.

On March 1, 2016, we completed our acquisitionWith the exception of Openwave Messaging, Inc. (“Openwave”). SEC guidance permits management to omit an assessment of an acquired business'the ERP implementation described above, there were no changes in the Company's internal control over financial reporting from management's assessment of internal control over financial reporting for a period not to exceed one year from the date of the acquisition. Accordingly, we have not assessed Openwaves’ internal control over financial reporting as of September 30, 2016.
Excluding the Openwave acquisition, there were no changes in our internal control over financial reportingthat occurred during the quarterquarterly period ended SeptemberJune 30, 20162020 that have materially affected, or are reasonably likely to materially affect, oureffect, the Company's internal control over financial reporting.


Limitations on Effectiveness of Controls and Procedures

In designing and evaluating the disclosure controls and procedures and internal control over financial reporting, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures and internal control over financial reporting must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.
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PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

On October 7, 2014, we filed an amended complaint in the United States District Court for the District of New Jersey (Civ Act. No. 3:14-cv-06220) against F-Secure Corporation and F-Secure, Inc. (collectively, “F-Secure"), claiming that F-Secure has infringed, and continues to infringe, severalFor a discussion of our patents.  In February 2015, we entered into a patent license and settlement agreement with F-Secure Corporation and F-Secure, Inc. whereby we granted each of these companies (but not their subsidiaries or affiliates) a limited license to our patents. As a result of entering into the patent license and settlement agreement, the parties filed a joint stipulation to dismiss the above complaint.
Our 2011 acquisition agreement with Miyowa SA provided that former shareholders of Miyowa SA would be eligible for earn-out payments to the extent specified business milestones were achieved following the acquisition. In December 2013, Eurowebfund and Bakamar, two former shareholders of Miyowa SA filed a complaint against us in the Commercial Court of Paris, France claiming that they are entitled to certain earn-out payments under the acquisition agreement. We were served with a copy of this complaint in January 2014. On December 3, 2015, the Court dismissed all claims in the complaint against us. On December 19, 2015, the former shareholders of Miyowa filed an appeal with the Court of Appeal of Paris, France, appealing the Court’s decision. Although we cannot predict the outcome of the appeal, or estimate any potential loss if the outcome is adverse, due to the inherent uncertainties of litigation, we believe the positions of Eurowebfund and Bakamar are without merit, and we intend to vigorously defend all claims brought by them.
We are not currently subject to anymaterial pending legal proceedings that could have a material adverse effect onimpact our operations; however, we may from time to time become a party to various legal proceedings arising in the ordinary courseresults of our business. We are currently the plaintiff in several patent infringement cases.  The defendants in several of these cases from time to time may file counterclaims.  Although due to the inherent uncertainties of litigation, we cannot predict the outcome of any of these actions at this time, we continue to pursue our claimsoperations, financial condition or cash flows see Note13. Commitments, Contingencies and believe that any counterclaims are without merit, and we intend to defend against all such counterclaims.
ITEM 1A.  RISK FACTORS
In addition to the other information set forth in this report, you should carefully consider the factors discussedOther included in Part I, “ItemItem 1. “Notes to Condensed Consolidated Financial Statements (unaudited)” of this Quarterly Report on Form 10-Q.

ITEM 1A. Risk Factors”RISK FACTORS

Except as stated below, there have been no material changes to our risk factors as previously disclosed in Part I, Item 1A. included in our Annual Report on Form 10-K for the year ended December 31, 2015,2019. In addition, the impacts of COVID-19 and any worsening of the economic environment may exacerbate the risks described below and in our Annual Report on Form 10-K for the year ended December 31, 2019, any of which could materially affect our business, financial condition or future results. The risks described in our Form 10-K are nothave a material impact on us.

Operational Risks

Public health crises, including the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also mayrecent novel coronavirus (COVID-19) outbreak, could materially adversely affect our business, financial condition and/and results of operations. Our business is based on our ability to provide products and services to customers throughout the United States and around the world and the ability of those customers to utilize and pay for those products and services for their businesses. As a result, our business could be materially adversely affected by a crisis, like the COVID-19 outbreak, that significantly impacts our current and potential customers and vendors. In addition, such a crisis could significantly increase the probability or operating results.  If anyconsequences of the risks actually occur,our business faces in ordinary circumstances, such as risks associated with our supplier and vendor relationships, risks of an economic slowdown, regulatory risks, and the costs and availability of financing. Because the severity, magnitude and duration of the COVID-19 outbreak and its economic consequences are uncertain and rapidly changing, the impact on our business, financial condition orand results of operations could be negatively affected.remains uncertain and difficult to predict. In addition, the ultimate impact of the COVID-19 outbreak on our business, financial condition and results of operations depends on many factors, including those discussed above, that case, the trading price ofare not within our stock could decline, and our stockholders may lose part or all of their investment.control.


ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES ANDUSE OF PROCEEDS

None.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.  MINE SAFETY DISCLOSURES


Not Applicable.

ITEM 5. OTHER INFORMATION
None.


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Table of Contents
ITEM 6.  EXHIBITS

Exhibit No.Description
Exhibit No.Description
3.1 
3.2
Restated Certificate of Incorporation of the Registrant, incorporated by reference to Registrant’s Registration Statement on Form S-1S‑1 (Commission File No. 333-132080)333‑132080).
3.2 
3.4
Amended and Restated Bylaws of the Registrant, incorporated by reference to Registrant’s Registration Statement on Form S-1S‑1 (Commission File No. 333-132080)333‑132080).
3.3 
4.2Form
Amendment No. 1 to Amended and Restated Bylaws of the Registrant’s Common Stock certificate,Registration, incorporated by reference to Exhibit 3.2 to the Registrant’s Registration StatementCurrent Report on Form S-1 (Commission File No. 333-132080).8-K filed on February 20, 2018.
10.1 
10.8Amended and Restated Credit
Release Agreement dated as of July 7, 2016April 22, 2020 between the Registrant and Wells Fargo Bank, National Association, as Administrative AgentMary Clark.
10.8.131.1 Form of Indenture for Convertible Senior Notes, incorporated by reference to Registrants Form S-3 (Commission File No. 333-132080).
10.8.2Third Amendment Lease Agreement between the Registrant and Triple Net Investments XXV, L.P. for the premises located at 1555 Spillman Drive, Bethlehem, Pennsylvania, dated as of May 9, 2016.
10.9Cingular Master Services Agreement, effective September 1, 2005 by and between the Registrant and Cingular Wireless LLC, incorporated by reference to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2008.
10.9.1Subordinate Material and Services Agreement No. SG021306.S.025 by and between the Registrant and AT&T Services, Inc. dated as of August 1, 2013, including order numbers  SG021306.S.025.S.001, SG021306.S.025.S.002, SG021306.S.025.S.003 and SG021306.S.025.S.004, incorporated by reference to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2013.
31.1
Certification of ChiefPrincipal Executive Officer pursuant to Rule 13a-14(a)13a‑14(a) of the Exchange Act, as adopted pursuant to section 302 of the Sarbanes-OxleySarbanes‑Oxley Act of 2002 (filed herewith)
31.2 
31.2
Certification of ChiefPrincipal Financial Officer pursuant to Rule 13a-14(a)13a‑14(a) of the Exchange Act, as adopted pursuant to section 302 of the Sarbanes-OxleySarbanes‑Oxley Act of 2002 (filed herewith)
32.1 
32.1
Certification of ChiefPrincipal Executive Officer pursuant to Rule 13a-14(b)13a‑14(b) of the Exchange Act and section 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-OxleySarbanes‑Oxley Act of 2002 (filed herewith)
32.2 
32.2
Certification of ChiefPrincipal Financial Officer pursuant to Rule 13a-14(b)13a‑14(b) of the Exchange Act and section 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-OxleySarbanes‑Oxley Act of 2002 (filed herewith)
101.INS
101.INSXBRL Instance Document
101.SCH
101.SCHXBRL Schema Document
101.CAL
101.CALXBRL Calculation Linkbase Document
101.DEF
101.DEFXBRL Taxonomy Extension Definition Linkbase
101.LABXBRL Labels Linkbase Document
101.PREXBRL Presentation Linkbase Document
101.LABXBRL Taxonomy Extension Label Linkbase




46
SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this reportReport to be signed on its behalf by the undersigned, thereunto duly authorized.

Synchronoss Technologies, Inc.
Synchronoss Technologies, Inc.
/s/ Glenn Lurie
Glenn Lurie
/s/Stephen G. Waldis
Stephen G. Waldis
Chairman of the Board of Directors and
Chief Executive Officer
(Principal executive officer)Executive Officer)
/s/ David Clark
David Clark
/s/Karen L. Rosenberger
Karen L. Rosenberger
Executive Vice President, Chief Financial Officer
and Treasurer

November 8, 2016


August 12, 2020
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