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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, 20162022
 
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 000-52049001-40574

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, 8th3rd 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, $.0001 par value
SNCR45,326,842The Nasdaq Stock Market, LLC
8.375% Senior Notes due 2026SNCRLThe Nasdaq Stock Market, LLC

As of August 8, 2022, there were 91,181,635 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
5
6
58
69
2131
3238
3239
3340
3340
3340
3443
3443
3443
3443
3544
3645




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, 2022December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents$25,512 $31,504 
Accounts receivable, net43,306 47,586 
Prepaid & other current assets47,763 42,901 
Total current assets116,581 121,991 
Non-current assets:
Property and equipment, net4,911 6,979 
Operating lease right-of-use assets22,791 26,399 
Goodwill209,806 224,577 
Intangible assets, net52,348 60,335 
Loan receivable4,834 4,834 
Other assets, non-current5,597 5,619 
Total non-current assets300,287 328,743 
Total assets$416,868 $450,734 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$5,659 $11,097 
Accrued expenses58,373 61,916 
Deferred revenues, current18,739 22,368 
Total current liabilities82,771 95,381 
Long-term debt, net of debt issuance costs133,826 133,104 
Deferred tax liabilities579 560 
Deferred revenues, non-current494 548 
Leases, non-current32,442 36,095 
Other non-current liabilities7,545 9,218 
Total liabilities257,657 274,906 
Commitments and contingencies:00
Series B Non-Convertible Perpetual Preferred Stock, $0.0001 par value; 150 shares authorized, 71 and 75 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively68,348 72,505 
Redeemable noncontrolling interest12,500 12,500 
Stockholders’ equity:
Common stock, $0.0001 par value; 150,000 shares authorized, 89,045 and 88,305 issued and outstanding at June 30, 2022 and December 31, 2021, respectively9 9 
Additional paid-in capital490,594 492,512 
Accumulated other comprehensive loss(48,221)(32,985)
Accumulated deficit(364,019)(368,713)
Total stockholders’ equity78,363 90,823 
Total liabilities and stockholders’ equity$416,868 $450,734 
(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 September 30, Nine Months Ended September 30,
 2016 2015 2016 2015
Net revenues$176,421
 $150,874
 $476,658
 $421,620
Costs and expenses: 
  
  
  
Cost of services*77,230
 63,438
 217,004
 172,013
Research and development28,141
 23,986
 78,408
 68,472
Selling, general and administrative31,600
 21,003
 89,799
 60,603
Net change in contingent consideration obligation572
 —
 7,299
 —
Restructuring charges977
 399
 5,139
 5,090
Depreciation and amortization24,692
 19,754
 74,009
 51,221
Total costs and expenses163,212

128,580

471,658

357,399
Income from operations13,209
 22,294
 5,000
 64,221
Interest income271
 546
 1,492
 1,483
Interest expense(1,596) (1,448) (5,006) (4,208)
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
        
Net income (loss) per common share attributable to Synchronoss:  
  
  
Basic$0.18
 $0.23
 $(0.11) $0.84
Diluted$0.16
 $0.21
 $(0.11) $0.77
Weighted-average common shares outstanding: 
  
  
  
Basic43,560
 42,491
 43,488
 42,077
Diluted48,590
 47,692
 43,488
 47,505
        
Comprehensive income attributable to Synchronoss$10,768
 $8,994
 $2,179
 $22,021
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Net revenues$65,236 $71,532 $131,102 $137,031 
Costs and expenses:
Cost of revenues1
22,316 27,142 47,155 55,779 
Research and development13,460 17,197 29,251 34,594 
Selling, general and administrative15,288 21,909 33,185 39,837 
Restructuring charges1,019 877 1,704 1,590 
Depreciation and amortization8,259 8,485 16,293 18,352 
Total costs and expenses60,342 75,610 127,588 150,152 
Income (loss) from operations4,894 (4,078)3,514 (13,121)
Interest income118 25 210 30 
Interest expense(3,343)(144)(6,668)(239)
Gain on divestiture2,622 — 2,622 — 
Other income (expense), net4,065 1,576 5,769 (1,820)
Income (loss) from operations, before taxes8,356 (2,621)5,447 (15,150)
(Provision) benefit for income taxes(435)201 (563)364 
Net income (loss)7,921 (2,420)4,884 (14,786)
Net (loss) income attributable to redeemable noncontrolling interests(75)(50)(190)286 
Preferred stock dividend(2,519)(21,476)(4,957)(32,006)
Net income (loss) attributable to Synchronoss$5,327 $(23,946)$(263)$(46,506)
Earnings (loss) per share:
Basic$0.06 $(0.54)$— $(1.07)
Diluted$0.06 $(0.54)$— $(1.07)
Weighted-average common shares outstanding:
Basic87,124 44,131 86,031 43,438 
Diluted89,249 44,131 86,031 43,438 

*1    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,
2022202120222021
Net income (loss)$7,921 $(2,420)$4,884 $(14,786)
Other comprehensive loss, net of tax:
Foreign currency translation adjustments(12,157)120 (15,316)(1,768)
Net income (loss) on inter-company foreign currency transactions62 (213)80 539 
Total other comprehensive loss(12,095)(93)(15,236)(1,229)
Comprehensive loss(4,174)(2,513)(10,352)(16,015)
Comprehensive (loss) income attributable to redeemable noncontrolling interests(75)(50)(190)286 
Comprehensive loss attributable to Synchronoss$(4,249)$(2,563)$(10,542)$(15,729)

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, 2022
Common StockTreasury StockAdditionalAccumulated OtherTotal
SharesAmountSharesAmountPaid-In CapitalComprehensive Income (Loss)Accumulated deficitStockholders' Equity
Balance at March 31, 202288,244 $9 — $— $491,966 $(36,126)$(371,865)$83,984 
Stock based compensation— — — — 1,152 — — 1,152 
Issuance of restricted stock868 — — — — — — — 
Preferred stock dividend— — — — (2,376)— — (2,376)
Amortization of preferred stock issuance costs— — — — (143)— — (143)
Shares withheld for taxes in connection with issuance of restricted stock(67)— — — (80)— — (80)
Net income (loss) attributable to Synchronoss— — — — — — 7,921 7,921 
Non-controlling interest— — — — 75 — (75)— 
Total other comprehensive income (loss)— — — — — (12,095)— (12,095)
Balance at June 30, 202289,045 $9 — $— $490,594 $(48,221)$(364,019)$78,363 


Three Months Ended June 30, 2021
Common StockTreasury StockAdditionalAccumulated OtherTotal
SharesAmountSharesAmountPaid-In CapitalComprehensive Income (Loss)Accumulated deficitStockholders' Equity
Balance at March 31, 202151,331 $5 (7,162)$(82,087)$491,295 $(29,349)$(357,801)$22,063 
Stock based compensation— — — — 2,221 — — 2,221 
Issuance of restricted stock1,644 — — — 1 — — 1 
Preferred stock dividends accrued— — — — (9,808)— — (9,808)
Amortization of preferred stock issuance costs— — — — (11,668)— — (11,668)
Issuance of common stock related to acquisition42,308 4 — — 109,996 — — 110,000 
Common Stock - Issuance Costs— — — — (8,340)— — (8,340)
Retirement of treasury stock(7,162)— 7,162 82,087 (82,087)— — — 
Net income attributable to Synchronoss— — — — — — (2,420)(2,420)
Non-controlling interest— — — — 50 — (50)— 
Total other comprehensive income (loss)— — — — — (93)— (93)
Balance at June 30, 202188,121 $9 — $— $491,660 $(29,442)$(360,271)$101,956 

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See accompanying notes to condensed consolidated financial statements.


Six Months Ended June 30, 2022
Common StockTreasury StockAdditionalAccumulated OtherTotal
SharesAmountSharesAmountPaid-In CapitalComprehensive Income (Loss)Accumulated deficitStockholders' Equity
Balance at December 31, 202188,305 $9 — $— $492,512 $(32,985)$(368,713)$90,823 
Stock based compensation— — — — 2,929 — — 2,929 
Issuance of restricted stock807 — — — — — — — 
Preferred stock dividend— — — — (4,814)— — (4,814)
Amortization of preferred stock issuance costs— — — — (143)— — (143)
Shares withheld for taxes in connection with issuance of restricted stock(67)— — — (80)— — (80)
Net income (loss) attributable to Synchronoss— — — — — — 4,884 4,884 
Non-controlling interest— — — — 190 — (190)— 
Total other comprehensive income (loss)— — — — — (15,236)— (15,236)
Balance at June 30, 202289,045 $9 — $— $490,594 $(48,221)$(364,019)$78,363 


Six Months Ended June 30, 2021
Common StockTreasury StockAdditionalAccumulated OtherTotal
SharesAmountSharesAmountPaid-In CapitalComprehensive Income (Loss)Accumulated deficitStockholders' Equity
Balance at December 31, 202051,177 $5 (7,162)$(82,087)$499,348 $(28,213)$(345,771)$43,282 
Stock based compensation— — — — 5,034 — — 5,034 
Issuance of restricted stock1,798 — — — 1 — — 1 
Preferred stock dividends accrued— — — — (19,215)— — (19,215)
Amortization of preferred stock issuance costs— — — — (12,791)— — (12,791)
Issuance of common stock related to acquisition42,308 4 — — 109,996 — — 110,000 
Common Stock - Issuance Costs— — — — (8,340)— — (8,340)
Retirement of treasury stock(7,162)— 7,162 82,087 (82,087)— — — 
Net income attributable to Synchronoss— — — — — — (14,786)(14,786)
Non-controlling interest— — — — (286)— 286 — 
Total other comprehensive income (loss)— — — — — (1,229)— (1,229)
Balance at June 30, 202188,121 $9 — $— $491,660 $(29,442)$(360,271)$101,956 

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)
 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.
Six Months Ended June 30,
20222021
Operating activities:
Net income (loss) from continuing operations$4,884 $(14,786)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization16,293 18,352 
Amortization of debt issuance costs678 — 
(Gain) loss on disposals of fixed assets1 (18)
Gain on sale of DXP & Activations Solutions(2,622)— 
(Gain) loss on disposals of intangible assets— (550)
Amortization of bond discount (premium)44 — 
Deferred income taxes(28)(1,471)
Stock-based compensation2,891 5,066 
Operating lease impairment, net175 1,205 
Changes in operating assets and liabilities:
Accounts receivable, net3,661 4,743 
Prepaid expenses and other current assets(314)(648)
Accounts payable(5,237)686 
Accrued expenses(2,650)(4,151)
Deferred revenues(3,015)(5,539)
Other liabilities(8,033)5,278 
Net cash provided by operating activities6,728 8,167 
Investing activities:
Purchases of fixed assets(573)(1,250)
Additions to capitalized software(10,695)(10,959)
Proceeds from the sale of intangibles— 550 
Proceeds from the sale of DXP & Activations Solutions7,500 — 
Net cash used in investing activities(3,768)(11,659)
Financing activities:
Share-based compensation-related proceeds, net of taxes paid on withholding shares — (1)
Taxes on withholding shares80 (1)
Debt issuance costs related to long term debt— (7,811)
Proceeds from issuance of long term debt— 125,000 
Repayment of revolving line of credit— (10,000)
Proceeds from issuance of common stock— 110,000 
Common stock issuance costs— (8,340)
Proceeds from issuance of Series B preferred stock— 75,000 
Series B preferred stock issuance costs— (2,495)
Series B preferred dividend paid in the form of cash(1,859)— 
Redemption of Series B Preferred stock(6,738)— 
Redemption of Series A Preferred stock— (278,665)
Net cash (used in) provided by financing activities(8,517)2,687 
Effect of exchange rate changes on cash(435)(296)
Net decrease in cash and cash equivalents(5,992)(1,101)
Cash and cash equivalents, beginning of period31,504 33,671 
Cash and cash equivalents, end of period$25,512 $32,570 
Supplemental disclosures of non-cash investing and financing activities:
Paid in kind dividends on Series A Preferred Stock$— $31,277 
Paid in kind dividends on Series B Preferred Stock$2,581 $— 
 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 innovatorprovider of white label cloud, solutions, software-based activation, secure mobility, identity managementmessaging, and secure messaging for mobile carriers, enterprises, retailers and OEMs across the globe. Synchronoss’ software provides innovative service provider and enterprisedigital solutions that drive billions of transactions on a wide range of connected devices across the world’s leading networks. The Company’s solutions include: activation and provisioning software for devices and services, cloud-based sync, backup, storageenable our customers to keep subscribers, systems, networks 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 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.
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.
in sync.
The Synchronoss Personal Cloud™ solutionplatform 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 carriera carrier’s customers to protect, engage with and manage their growing cache of personally generated, mobilepersonal content over long periods of time.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.

The Synchronoss Enterprise solutionsPersonal Cloud™ platform is specifically designed to support an advanced mobility digital experience for accessing and protecting business and consumer information. The Company’s identity 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 a white label messaging platform for service providers and offers a full range of deployment options. The platform can be deployed fully integrated with on premise systems, through hybrid deployment support, for an optimal mix of technologies and 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 wirelessly enabled consumer electronics such as wearables for health and wellness, cameras, tablets, e-readers, personal navigation devices, and GPS enabled devices, as well as connected devices (supportautomobiles and homes.

The Synchronoss Messaging Platform powers mobile messaging and mailboxes for hundreds of millions of telecommunication subscribers. The Advanced Messaging platform is a powerful, secure, intelligent, white-label messaging platform that expands capabilities for communications service provider and multi-service providers to offer P2P messaging via Rich Communications Services (“RCS”). The Mobile Messaging Platform (“MMP”) provides a single standard ecosystem for onboarding and management to brands, advertisers and message wholesalers.

The Synchronoss Digital Portfolio includes the Total Network Management application which provides operators with the tools and software to design their physical network, streamline their infrastructure purchases, and manage and optimize comprehensive network expense for leading protocols including iCal, CalDAV, CardDAV, EAS, IMAP/IDLE), Native Mobile App for iOS and Android for mail, contacts, calendar and task management.top tier carriers around the globe.


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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. 2021. The results of operations for the three and six months ended June 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022.

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 statements have been reclassified to conform to the current year’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, 2015.2021.

Risks and Uncertainties

There continue to be uncertainties regarding the current coronavirus ("COVID-19") pandemic, and the Company is closely monitoring the impact of the pandemic on all aspects of its business, including how it will impact its customers, employees, suppliers, vendors, business partners and distribution channels. While the pandemic did not materially affect the Company’s financial results and business operations for the three and six months ended June 30, 2022, the Company is unable to predict the impact that COVID-19 will have on its financial position and operating results due to numerous uncertainties. The Company will continue to assess the evolving impact of the COVID-19 pandemic and will make adjustments to its operations as necessary.

Recently Issued Accounting Standards

In August 2016, the Financial Account Standards Board (“FASB”) 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 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 the Company would be required to apply the amendments prospectively as of the earliest date practicable. The Company is currently evaluating the impact of ASU 2016-15 on the condensed consolidated financial statements.Recent accounting pronouncements adopted

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 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 evaluating the effect that these ASUs will have on its condensed consolidated financial statements and related disclosures. The Company has not yet selected a transition method nor has it determined the full effect of these standards on its ongoing financial reporting.

StandardDescriptionEffect on the financial statements
ASU 2021-04 Earnings Per Share (Topic 260), Debt— Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40)The amendments in this Update provide guidance for a modification or an exchange of a freestanding equity-classified written call option that is not within the scope of another Topic.We adopted this standard on January 1, 2022. The Company evaluated these changes and concluded that they did not have any material impact on the Company’s consolidated financial position or results of operations upon adoption.
Date of adoption: January 1, 2022.
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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)


ASU 2021-05 Leases (Topic 842). Lessors—Certain Leases with Variable Lease PaymentsThe amendments in this Update affect lessors with lease contracts that (1) have variable lease payments that do not depend on a reference index or a rate and (2) would have resulted in the recognition of a selling loss at lease commencement if classified as sales-type or direct financing. FASB amends lessor classification guidance to prevent selling losses on leases with variable payments.We adopted this standard on January 1, 2022. The Company evaluated these changes and concluded that they did not have any material impact on the Company’s consolidated financial position or results of operations upon adoption.
Date of adoption: January 1, 2022.
Impact
ASU 2021-08 Business Combinations (Topic 805). Accounting for Contract Assets and Contract Liabilities
from Contracts with Customers		The amendments in this Update primarily address the accounting for contract assets and contract liabilities from revenue contracts with customers in a business combination. However, the amendments also apply to contract assets and contract liabilities from other contracts to which the provisions of Topic 606 apply, such as contract liabilities from the sale of nonfinancial assets within the scope of Subtopic 610-20, Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets.We adopted this standard on January 1, 2022. The Company evaluated these changes and concluded that they did not have any material impact on the Company’s consolidated financial position or results of operations upon adoption.
Date of adoption: January 1, 2022.

Digital Experience Platform and Activation Solutions Sale

On March 7, 2022, Synchronoss Technologies, Inc. and iQmetrix Global Ltd. (“iQmetrix ”), entered into an Asset Purchase Agreement, pursuant to which Synchronoss has agreed to sell its Digital Experience Platform and activation solutions (the “DXP Business”) to iQmetrix for up to a total purchase price of New Accounting Pronouncements
In March, 2016,$14 million. The purchase price is payable as follows: (i) $7.5 million on 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 aspectsclosing date of the accounting for share-based payments. While aimed at reducingTransaction, (ii) $0.5 million deposited into an escrow account on the costClosing Date, (iii) $1 million paid twelve (12) months from the Closing Date, and complexity(iv) $5 million that may be payable as an earn-out.

This transaction closed on May 11, 2022. The Company received the $7.5 million cash payment on the transaction close date and recorded the $0.5 million and $1 million escrow payments into other current assets noting this consideration is not contingent on any further actions. The Company determined the fair value of the accounting for share-based payments, the amendments may significantly impact net income, earnings per share,earn-out provision was $3.6 million of which $3.0 million was recorded as an other current asset and the statementremaining portion was recorded as non-current other asset.

The book value of the divested intangible assets associated with the DXP Business was $2.3 million. For the goodwill allocation, the fair value of the core reporting unit was estimated using a combination of the income approach, which incorporates the use of the discounted cash flows.flow method, and the market approach, which incorporates the use of earnings and revenue multiples based on market data. Based on the fair value of the core reporting unit and the aggregate consideration received in the transaction, the Company determined the attributable fair value of goodwill to the DXP Business was $7.6 million. The ASU is effective for public companiestransaction resulted in annual periods beginning after December 15, 2016, and interim periods within those years. The Company elected to early adopt this standarda $2.6 million gain in the second quarter endedof 2022.

Accounts Receivable Securitization Facility

On 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,23, 2022 (the “Closing Date”), the Company recordedand certain of its subsidiaries (together with the Company, the “Company Group”) entered into a cumulative-effect adjustment of $1.0$15 million to adjust retained earnings.accounts receivable securitization facility (the “A/R Facility”) with Norddeutsche Landesbank Girozentrale.

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 classifiedA/R Facility transaction includes (i) Receivables Purchase Agreements (the “Receivables Purchase Agreements”) dated 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, 2016 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 resultsClosing Date, among the Company, as follows:initial servicer, SN Technologies, LLC, a wholly owned special purpose subsidiary of the Company (“SN Technologies”), as seller, Norddeutsche Landesbank Girozentrale, as administrative agent (the “Administrative Agent”), and the purchasers party thereto, the group agents party thereto and the originators party thereto; (ii) Purchase and Sale Agreements (the “Purchase and Sale Agreements”) dated as of the Closing Date, between the Company
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)


Group, as originators (the “Originators”), and SN Technologies, as purchaser; (iii) the Administration Agreement (the “Administration Agreement”) dated as of the Closing Date, between the Company, as servicer, and Finacity Corporation, as administrator; and (iv) the Performance Guaranty (the “Performance Guaranty”) dated as of the Closing Date made by the Company in favor of the Administrative Agent.

Pursuant to the Purchase and Sale Agreements, the Originators will sell existing and future accounts receivable [and related assets] (the “Receivables”) to SN Technologies in exchange for cash and/or subordinated notes. The Originators and SN Technologies intend the transactions contemplated by the Purchase and Sale Agreements to be true sales to SN Technologies by the respective Originators. Pursuant to the Receivables Purchase Agreement, SN Technologies will in turn grant an undivided security interest to the Administrative Agent in the Receivables in exchange for a credit facility permitting borrowings of up to $15 million outstanding from time to time. Yield is payable to the Administrative Agent under the Receivables Purchase Agreements at a variable rate based on the Norddeutsche Landesbank Girozentrale’s Hanover funding rate plus a 2.35% margin. The Company pays a commitment fee shall equal 0.85% per annum on the average daily unused outstanding capital. Pursuant to the Performance Guaranty, the Company guarantees the performance of the Originators of their obligations under the Purchase and Sale Agreements.

The Company adopted ASU 2015-03, “Interest- Imputationhas not agreed to guarantee any obligations of Interest (subtopic 835-30); SimplifyingSN Technologies or the Presentationcollection of Debt Issuance Costs,any of the receivables and ASU 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line of Credit Arrangements, duringwill not be responsible for any obligations to the first quarter of 2016, concurrently. The adoption of these ASUs requiredextent the failure to perform such obligations by the Company or any Originators results from receivables being uncollectible on account of the insolvency, bankruptcy or lack of creditworthiness or other financial inability to reclassifypay of the related obligor.

Unless earlier terminated or subsequently extended pursuant to the terms of the Receivables Purchase Agreement, the A/R Facility will expire on June 23, 2025.

The foregoing description of the A/R Facility and the respective transactions contemplated thereby does not purport to be complete and is qualified in its deferred financing costs associatedentirety by reference to the full text of the Receivables Purchase Agreements, Purchase and Sale Agreements, Administration Agreement and Performance Guaranty, copies of which are filed as Exhibits 10.1, 10.2, 10.3 and 10.4, respectively, on Form 8-K filed with its Convertible Senior Notes from other assets to long-term debtSecurities and Exchange Commission on a retrospective basis. June 23, 2022.

The Company's consolidated balance sheets included deferred financing costs of $4.1 million and $5.1 millionCompany has 0t drawn on the A/R Facility as of SeptemberJune 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. 2022.

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)


3. Revenue
4. Fair Value Measurements
Disaggregation of Assetsrevenue

The Company disaggregates revenue from contracts with customers into the nature of the products and Liabilitiesservices and geographical regions. The Company’s geographic regions are the Americas, Europe, the Middle East and Africa (“EMEA”), and Asia Pacific (“APAC”). The majority of the Company’s revenue is from the TMT sector.
Three Months Ended June 30, 2022Three Months Ended June 30, 2021
CloudDigitalMessagingTotalCloudDigitalMessagingTotal
Geography:
Americas$41,843 $8,985 $2,309 $53,137 $37,071 $10,603 $11,265 $58,939 
APAC7 907 6,345 7,259 — 915 6,249 7,164 
EMEA1,627 545 2,668 4,840 1,820 613 2,996 5,429 
Total$43,477 $10,437 $11,322 $65,236 $38,891 $12,131 $20,510 $71,532 
Service Line:
Professional Services$3,234 $1,380 $2,642 $7,256 $3,884 $2,118 $2,587 $8,589 
Transaction Services210 1,721 33 1,964 1,321 945 2 2,268 
Subscription Services40,033 6,438 8,037 54,508 33,686 8,546 17,921 60,153 
License— 898 610 1,508 — 522 — 522 
Total$43,477 $10,437 $11,322 $65,236 $38,891 $12,131 $20,510 $71,532 

Six Months Ended June 30, 2022Six Months Ended June 30, 2021
CloudDigitalMessagingTotalCloudDigitalMessagingTotal
Geography:
Americas$81,558 $19,440 $5,001 $105,999 $74,102 $21,843 $14,781 $110,726 
APAC63 1,666 13,161 14,890 — 2,043 12,949 14,992 
EMEA3,357 1,495 5,361 10,213 3,685 1,222 6,406 11,313 
Total$84,978 $22,601 $23,523 $131,102 $77,787 $25,108 $34,136 $137,031 
Service Line:
Professional Services$6,588 $3,016 $5,783 $15,387 $7,809 $4,229 $5,198 $17,236 
Transaction Services546 2,749 56 3,351 3,296 3,213 3 6,512 
Subscription Services77,844 14,648 16,552 109,044 66,682 16,979 28,535 112,196 
License— 2,188 1,132 3,320 — 687 400 1,087 
Total$84,978 $22,601 $23,523 $131,102 $77,787 $25,108 $34,136 $137,031 

Trade Accounts Receivable and Contract balances

The Company classifies marketable securitiesits right to consideration in exchange for deliverables as available-for-sale.either a receivable or a contract asset. A receivable is a right to consideration that is unconditional (i.e. only the passage of time is required before payment is due). For example, the Company recognizes a receivable for revenues related to its time and materials and transaction or volume-based contracts. The Company presents such receivables in Trade accounts receivable, net in its Condensed Consolidated Statements of Financial Position at their net estimated realizable value. The Company maintains an allowance for credit losses to provide
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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)

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 economic indicators.

A contract asset is a right to consideration 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 professional services engagement but are not entitled to bill until the Company achieves specified milestones. Contract assets balance at June 30, 2022 is $15.5 million.

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 non-current) during the period are as follows:
Contract Liabilities1
Balance - January 1, 2022$22,916 
Revenue recognized in the period(130,691)
Amounts billed but not recognized as revenue127,008 
Balance - June 30, 2022$19,233 

1    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, 2022. 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, 2022, the aggregate amount of transaction price allocated to remaining performance obligations, other than those meeting the exclusion criteria above, was $156.9 million, of which approximately 91.5 percent is expected to be recognized as revenues within 2 years, and the remainder thereafter.

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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)

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.

4. Fair Value Measurements

In 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, 2022
Total(Level 1)(Level 2)(Level 3)
Assets
Cash and cash equivalents$25,512 $25,512 $— $— 
Total assets$25,512 $25,512 $— $— 
Temporary equity
Redeemable noncontrolling interests1
$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, 2021
Total(Level 1)(Level 2)(Level 3)
Assets
Cash and cash equivalents$31,504 $31,504 $— $— 
Total assets$31,504 $31,504 $— $— 
Temporary Equity
Redeemable noncontrolling interests1
$12,500 $— $— $12,500 
Total temporary equity$12,500 $— $— $12,500 


 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
(Amounts1 Put arrangements held by the noncontrolling interests 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 securities are as follows: 
 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 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 growth 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 venture.

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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:
15
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 Company determined the preliminarychanges in fair value of the net assets acquiredCompany’s Level 3 redeemable noncontrolling interests during the six months ended June 30, 2022 were as follows:
Redeemable noncontrolling interests
Balance at December 31, 2021$12,500 
Fair value adjustment(190)
Net loss attributable to redeemable noncontrolling interests190 
Balance at June 30, 2022$12,500 

5. Leases
 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
  


The goodwill recorded in connectionCompany has entered into contracts with this acquisition wasthird 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 operating synergiesfactors 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 benefits expectedcharges. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The Company is party to result fromcertain sublease arrangements, primarily related to the combined operationsCompany’s real estate leases, where it acts as the lessee and the assembled workforce acquired. intermediate lessor.

The goodwill acquired is not deductible for tax purposes.
Acquisition-related costs recognized during the nine months ended September 30, 2016 and 2015 including transaction costs suchCompany reflects finance leases as legal, accounting, valuation and other professional services, were $2.9 million and $1.0 million, respectively and are included in the selling, general and administrative expensesa component of Leases, non-current on the condensed consolidated statements of income.Condensed Consolidated Balance Sheet. The finance leases were not material for the period ended June 30, 2022.

6. Stockholders’ Equity
Stock-Based Compensation

The following table summarizes information about stock-based compensation:
16
 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 total stock-based compensation cost related to unvested equity awards as of September 30, 2016 was approximately $73.4 million. The expense is expected to be recognized over a weighted-average period of approximately 2.65 years. 


14
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 following table presents information about the Company's Right of Use (ROU) assets and lease liabilities at June 30, 2022:

ROU assets:
Non-current operating lease ROU assets$22,791 
Operating lease liabilities:
Current operating lease liabilities1
$6,099 
Non-current operating lease liabilities32,047 
Total operating lease liabilities$38,146 

1    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, 2022:

Three Months Ended June 30, 2022Six Months Ended June 30, 2022
Operating lease cost1
$1,972 $4,014 
Other lease costs and income:
Variable lease costs1
736 1,171 
Operating lease impairments1
(268)175 
Sublease income1
(713)(1,359)
Total net lease cost$1,727 $4,001 

1    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.


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)

The following table provides the undiscounted amount of future cash flows included in our lease liabilities at June 30, 2022 for each of the five years subsequent to December 31, 2021 and thereafter, as well as a reconciliation of such undiscounted cash flows to our lease liabilities at June 30, 2022:
Operating Leases
2022$4,828 
20238,035 
20248,174 
20258,021 
20267,859 
Thereafter10,448 
Total future lease payments47,365 
Less: amount representing interest(9,219)
Present value of future lease payments (lease liability)$38,146 

The following table provides the weighted-average remaining lease term and weighted-average discount rates for our leases as of June 30, 2022:

Operating Leases:
Weighted-average remaining lease term (years), weighted based on lease liability balances5.67
Weighted-average discount rate (percentages), weighted based on the remaining balance of lease payments7.9%

The following table provides certain cash flow and supplemental noncash information related to our lease liabilities for the six months ended June 30, 2022:

Operating Leases:
Cash paid for amounts included in the measurement of lease liabilities$5,039 

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 fair value of the Note as of the transaction date to be approximately $4.8 million. The Company determined the fair value of the Note using a discounted cash
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)

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. No gain or loss was recognized as a result of the transaction. As of June 30, 2022, the Company reassessed the fair value of the Note and there were no material changes.

In accordance with the terms of the agreement, STIN has made the required payments to the Company as of June 30, 2022.

7. Debt

Offering of Senior Notes

On June 30, 2021, the Company closed its underwritten public offering of $120.0 million aggregate principal amount of 8.375% senior notes due 2026 at a par value of $25.00 per senior note (the “Senior Notes”). The offering was conducted pursuant to an underwriting agreement (the “Notes Underwriting Agreement”) dated June 25, 2021, by and among the Company and B. Riley Securities, Inc., as representative of the several underwriters (the “Notes Underwriters”). At the closing, the Company issued $125.0 million aggregate principal amount of Senior Notes, inclusive of $5.0 million aggregate principal amount of Senior Notes issued pursuant to the full exercise of the Notes Underwriters’ option to purchase additional Senior Notes.

The Notes Underwriting Agreement contains customary representations, warranties and covenants of the Company, customary conditions to closing, indemnification obligations of the Company and the Notes Underwriters, including for liabilities under the Securities Act, other obligations of the parties and termination provisions.

On June 30, 2021, the Company entered into an indenture (the “Base Indenture”) and a supplemental indenture (the “First Supplemental Indenture” and, together with the Base Indenture, the “Indenture”) with The Bank of New York Mellon Trust Company National Association, as trustee (the “Trustee”), between the Company and the Trustee. The Indenture establishes the form and provides for the issuance of the Senior Notes.

The Senior Notes are senior unsecured obligations of the Company and rank equally in right of payment with all of the Company’s existing and future senior unsecured and unsubordinated indebtedness. The Senior Notes are effectively subordinated in right of payment to all of the Company’s existing and future secured indebtedness to the extent of the value of the assets securing such indebtedness and structurally subordinated to all existing and future indebtedness of the Company’s subsidiaries, including trade payables. The Senior Notes bear interest at the rate of 8.375% per annum. Interest on the Senior Notes is payable quarterly in arrears on January 31, April 30, July 31 and October 31 of each year, commencing on July 31, 2021. The Senior Notes will mature on June 30, 2026, unless redeemed prior to maturity.

The Company may, at its option, at any time and from time to time, redeem the Senior Notes for cash in whole or in part (i) on or after June 30, 2022 and prior to June 30, 2023, at a price equal to $25.75 per Senior Note, plus accrued and unpaid interest to, but excluding, the date of redemption, (ii) on or after June 30, 2023 and prior to June 30, 2024, at a price equal to $25.50 per Senior Note, plus accrued and unpaid interest to, but excluding, the date of redemption, (iii) on or after June 30, 2024 and prior to June 30, 2025, at a price equal to $25.25 per Senior Note, plus accrued and unpaid interest to, but excluding, the date of redemption, and (iv) on or after June 30, 2025 and prior to maturity, at a price equal to 100% of their principal amount, plus accrued and unpaid interest to, but excluding, the date of redemption. On and after any redemption date, interest will cease to accrue on the redeemed Senior Notes.

The Indenture contains customary events of default and cure provisions. If an uncured default occurs and is continuing, the Trustee or the holders of at least 25% of the principal amount of the Senior Notes may declare the entire amount of the Senior Notes, together with accrued and unpaid interest, if any, to be immediately due and payable. In the case of an event of default involving the Company’s bankruptcy, insolvency or reorganization, the principal of, and accrued and unpaid interest on, the principal amount of the Senior Notes, together with accrued and unpaid interest, if any, will automatically, and without any declaration or other action on the part of the Trustee or the holders of the Senior Notes, become due and payable.

19
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 October 25, 2021, the Company entered into an At Market Issuance Sales Agreement (the “Sales Agreement”) between the Company and B. Riley Securities, Inc. (the “Agent”), a related party, pursuant to which the Company may offer and sell, from time to time, up to $18.0 million of the Company’s 8.375% Senior Notes due 2026. Sales of the additional Senior Notes pursuant to the Sales Agreement, if any, may be made in transactions that are deemed to be “at the market offerings” as defined in Rule 415 under the Securities Act of 1933, as amended (the “Securities Act”). Under the Sales Agreement, the Agent will be entitled to compensation of 2.0% of the gross proceeds of all notes sold through it as the Company’s agent.

During the fourth quarter of 2021, the Company sold an additional $16.1 million aggregate principal amount of Senior Notes pursuant to the Sales Agreement. The additional Senior Notes sold have terms identical to the initial Senior Notes and are fungible and vote together with, the initial Senior Notes. The Senior Notes are listed and trade on The Nasdaq Global Market under the symbol “SNCRL.”

The carrying amounts of the Company’s borrowings were as follows:

Senior NotesJune 30, 2022December 31, 2021
8.375% Senior Notes due 2026$141,077 $141,077 
Unamortized discount and debt issuance cost1
(7,251)(7,973)
Carrying value of Senior Notes$133,826 $133,104 

1 Debt issuance costs are deferred and amortized into interest expense using the effective interest method.

The total fair value of the outstanding Senior Notes was $107.4 million as of June 30, 2022. The Company is in compliance with its debt covenants as of June 30, 2022.

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 bore 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 0.5%, the prime commercial lending rate as determined by the Agent, and the daily LIBOR rate plus 1.0%, in each case plus an applicable margin and subject to a floor of 0.5%.

On June 30, 2021, the Company paid off the outstanding balance and closed the Revolving Credit Facility.


20
SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
(Amounts in tables in thousands, except for per share data or unless otherwise noted)

Interest expense

The following table summarizes the Company’s interest expense:
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
2021 Non-Convertible Senior Notes due 2026:
Amortization of debt issuance costs$343 $— $678 $— 
Interest on borrowings2,954 — 5,908 — 
Amortization of debt discount22 — 44 — 
2019 Revolving Credit Facility:
Amortization of debt issuance costs— 72 — 84 
Interest on borrowings— 63 — 126 
Other24 9 38 29 
Total$3,343 $144 $6,668 $239 


8. Accumulated Other Comprehensive (Loss) / Income

The changes in accumulated other comprehensive (loss) income during the six months ended June 30, 2022 were as follows:
Balance at December 31, 2021Other comprehensive lossTax effectBalance at
June 30, 2022
Foreign currency$(29,350)$(15,316)$— $(44,666)
Unrealized income (loss) on intercompany foreign currency transactions(3,635)128 (48)(3,555)
Unrealized holding losses on marketable debt securities— — — — 
Total$(32,985)$(15,188)$(48)$(48,221)

9. Capital Structure

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. No dividends have ever been declared or paid by the Company.

Common Stock Offering

On June 29, 2021, the Company closed its underwritten public offering of common stock, par value $0.0001 per share. The offering was conducted pursuant to an underwriting agreement (the “Underwriting Agreement”) dated June 24, 2021, by and between the Company and B. Riley Securities, Inc., as representative of the several underwriters (the “Underwriters”) for net proceeds of $102.3 million. At the closing, the Company issued 42,307,692 shares of common stock, inclusive of 3,846,154
21
SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
(Amounts in tables in thousands, except for per share data or unless otherwise noted)

shares of common stock issued pursuant to the full exercise of the Underwriters’ option to purchase additional shares of common stock. The Company used the net proceeds for the redemption of the Series A Convertible Preferred Stock.

Shelf Registration Statement

On August 19, 2020, the Company filed a universal shelf registration statement with the SEC for the issuance of common stock, preferred stock, debt securities, guarantees of debt securities, warrants and units up to an aggregate amount of $250.0 million (“the 2020 Shelf Registration Statement”). On August 28, 2020, the 2020 Shelf Registration Statement was declared effective by the SEC. As of June 30, 2022, except for the Common Stock offering and the issuance of Senior Notes, the Company has not raised additional capital using the 2020 Shelf Registration Statement.

Preferred Stock

The Company’s Board of Directors (the “Board”) 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.

Series B Non-Convertible Preferred Stock

On June 30, 2021, the Company closed a private placement of 75,000 shares of its Series B Perpetual Non-Convertible Preferred Stock, par value $0.0001 per share, with an initial liquidation preference of $1,000 per share (the “Series B Preferred Stock”), for net proceeds of $72.5 million (the “Series B Transaction”). The sale of the Series B Preferred Stock was pursuant to the Series B Preferred Stock Purchase Agreement, dated as of June 24, 2021 (the “Series B Purchase Agreement”), between the Company and B. Riley Principal Investments, LLC (“BRPI”).

In connection with the closing of the Series B Transaction, the Company (i) filed a Certificate of Designation with the State of Delaware setting forth the rights, preferences, privileges, qualifications, restrictions and limitations on the Series B Preferred Stock (the “Series B Certificate”) and (ii) entered into an Investor Rights Agreement with B. Riley Financial, Inc. (“B. Riley Financial”) and BRPI setting forth certain governance and registration rights of B. Riley Financial with respect to the Company.

Certificate of Designation of the Series B Preferred Stock

The rights, preferences, privileges, qualifications, restrictions and limitations of the shares of Series B Preferred Stock are set forth in the Series B Certificate. Under the Series B Certificate, the holders of the Series B Preferred Stock are entitled to receive, on each share of Series B Preferred Stock on a quarterly basis, an amount equal to the dividend rate, as described in the following sentence, divided by four and multiplied by the then-applicable Liquidation Preference per share of Series B Preferred Stock (collectively, the “Preferred Dividends”). The dividend rate is (1) 9.5% per annum for the period commencing on June 30, 2021 and ending on and including December 31, 2021, (2) 13% per annum for the year commencing on January 1, 2022 and ending on and including December 31, 2022; and (3) 14% per annum for the year commencing on January 1, 2023 and thereafter. The Preferred Dividends will be due in cash on January 1, April 1, July 1 and October 1 of each year (each, a “Series B Dividend Payment Date”). The Company may choose to pay the Series B Preferred Dividends in cash or in additional shares of Series B Preferred Stock. In the event the Company does not declare and pay a dividend in cash on any Series B Dividend Payment Date, the unpaid amount of the Preferred Dividend will be added to the Liquidation Preference. As of June 30, 2022, the Liquidation Value and Redemption Value of the Series B Preferred Shares was $73.0 million.

On and after the fifth anniversary of the date of issuance, holders of shares of Series B Preferred Stock will have the right to cause the Company to redeem each share of Series B Preferred Stock for cash in an amount equal to the sum of the current liquidation preference and any accrued dividends. Each share of Series B Preferred Stock will also be redeemable at the option of the holder upon the occurrence of a “Fundamental Change” at (i) par in the case of a payment in cash or (ii) 1.5 times par in the case of payment in shares of Common Stock (such shares being, “Registrable Securities”), subject to certain limitations on the amount of stock that could be issued to the holders of Series B Stock. In addition, the Company will be permitted to redeem outstanding shares of the Series B Preferred Stock at any time for the sum of the then-applicable Liquidation Preference and the accrued but unpaid dividends. Pursuant to the Series B Certificate, the Company will be required to use (i) the first $50.0 million of proceeds from certain transactions (i.e., disposition, sale of assets, tax refunds) received by the Company to
22
SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
(Amounts in tables in thousands, except for per share data or unless otherwise noted)

redeem for cash, shares of the Series B Preferred Stock, on a pro rata basis among each holder of Series B Preferred Stock and (ii) the next $25.0 million of proceeds from certain transactions received by the Company may be used by the Company to buy back shares of Common Stock and to the extent, not used for such purpose by the Company, to redeem, for cash, shares of the Series B Preferred Stock, on a pro rata basis among each holder of the Series B Preferred Stock.

The Company shall be required to obtain the prior written consent of the holders holding at least a majority of the outstanding shares of the Series B Preferred Stock before taking certain actions, including: (i) certain dividends, repayments and redemptions; (ii) any amendment to the Company’s certificate of incorporation that adversely affects the rights, preferences, privileges or voting powers of the Series B Preferred Stock; and (iii) issuances of stock ranking senior or equivalent to shares of the Series B Preferred Stock (including additional shares of the Series B 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. Other than with respect to the foregoing consent rights, the Series B Preferred Stock is non-voting stock.

Investor Rights Agreement

On June 30, 2021, the Company, B. Riley Financial and BRPI entered into an Investor Rights Agreement (the “Investor Rights Agreement”). Pursuant to the Investor Rights Agreement, for so long as affiliates of B. Riley Financial beneficially own at least 10% of the outstanding shares of common stock (unless such equity threshold percentage is not met due to dilution from equity issuances), B. Riley Financial is entitled to nominate one Class II director (the “B. Riley Nominee”) to the Company’s board of directors (the “Board”), who shall be an employee of B. Riley Financial or its affiliates and is approved by the Board, such approval not to be unreasonably withheld. For so long as affiliates of B. Riley Financial beneficially own 5% or more but less than 10% of the outstanding shares of common stock (unless such equity threshold percentage is not met due to dilution from equity issuances), B. Riley Financial is entitled to certain board observer rights.

A summary of the Company’s Series B Perpetual Non-Convertible Preferred Stock balance at June 30, 2022 and changes during the six months ended June 30, 2022, are presented below:
Series B Preferred Stock
SharesAmount
Balance at December 31, 202175 $72,505 
Issuance of Series B preferred stock— — 
Issuance costs related to preferred stock— — 
Amortization of preferred stock issuance costs— 143 
Issuance of preferred PIK dividend3 2,438 
Redemption of Series B preferred shares(7)(6,738)
Balance at June 30, 202271 $68,348 

On April 1, 2022 the Company paid in-kind the accrued Series B Perpetual Non-Convertible Preferred Stock dividend of $2.4 million. On April 18, 2022, the Company made a $2.5 million principal and interest payment to redeem 2,438 shares of Series B Preferred Stock. On May 10, 2022, the Company made an additional $4.4 million principal and interest payment to redeem 4,300 shares of Series B Preferred Stock.

On July 1, 2022 the Company paid the accrued Series B Perpetual Non-Convertible Preferred Stock dividend of $2.3 million in form of cash.

Series A Convertible 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 exchange for $97.7 million in
23
SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
(Amounts in tables in thousands, except for per share data or unless otherwise noted)

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”).

Redemption of Series A Preferred Stock

The net proceeds from the common stock public offering, Senior Note offering and the Series B transaction was used in part to fully redeem all outstanding shares of the Company’s Series A Preferred Stock on June 30, 2021 (the “Redemption”). The Company redeemed in full all of the 268,917 outstanding shares of the Series A Preferred Stock for an aggregate Redemption Price of $278.7 million and all rights under the Investor Rights Agreement relating to the Series A Preferred Stock were terminated effective with the Redemption. No Series A Preferred Stock remain outstanding or authorized as of June 30, 2022.

Registration Rights

The Investor Rights Agreement entered into on June 30, 2021 provides that in the event Synchronoss issues Registrable Securities to the holders of Series B Preferred Stock, such holders will have certain demand and piggy-back registration rights with respect to such Registrable Securities. In addition, on June 30, 2021, in connection with the redemption of the Series A Preferred Stock, the Investor Rights Agreement between the Company and Silver terminated.

Stock Plans

At the annual meeting of stockholders the Company held on June 16, 2022, the stockholders of the Company approved and adopted the Certificate of Amendment of the Company’s restated certificate of incorporation to increase the total number of shares of authorized common stock from 100 million shares to 150 million shares.

As of June 30, 2022, there were 12.7 million shares available for the grant or award under the Company’s 2015 Equity Incentive Plan and 0.5 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 awards in cash upon vesting and the Company has reflected such awards in accrued expenses. As of June 30, 2022, the liability for such awards is approximately $0.5 million.

24
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-Based Compensation

The following table summarizes stock-based 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,
2022202120222021
Cost of revenues$139 $379 $360 $857 
Research and development316 696 872 1,551 
Selling, general and administrative509 1,270 1,659 2,658 
Total stock-based compensation expense$964 $2,345 $2,891 $5,066 

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,
2022202120222021
Stock options$446 $893 $1,240 $1,848 
Restricted stock awards509 1,329 1,387 3,039 
Performance Based Cash Units9 123 264 179 
Total stock-based compensation before taxes$964 $2,345 $2,891 $5,066 
Tax benefit$190 $440 $567 $937 

The total stock-based compensation cost related to unvested equity awards as of June 30, 2022 was approximately $8.1 million. The expense is expected to be recognized over a weighted-average period of approximately 2.0 years.

The total stock-based compensation cost related to unvested performance based cash units as of June 30, 2022 was approximately $0.5 million. The expense is expected to be recognized over a weighted-average period of approximately 1.1 years.

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 June 30,Six Months Ended June 30,
2022202120222021
Expected stock price volatility74.1 %83.1 %74.1 %83.1 %
Risk-free interest rate3.2 %0.6 %3.2 %0.6 %
Expected life of options (in years)4.134.254.134.24
Expected dividend yield0.0 %0.0 %0.0 %0.0 %
Weighted-average fair value (PSV) of the options$0.73 $1.81 $0.73 $1.89 
 Three Months Ended September 30, Nine Months Ended September 30,
 2016 2015 2016 2015
Expected stock price volatility46% 46% 45% 48%
Risk-free interest rate1.27% 1.27% 1.16% 1.26%
Expected life of options (in years)3.98
 3.98
 4.00
 4.00
Expected dividend yield0% 0% 0% 0%
Weighted-average fair value (grant date) of the options$15.53
 $15.53
 $11.08
 $16.54
The following table summarizes information about stock options outstanding as of September 30, 2016: 
25
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 to stock options: 
 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
A summary of the Company’s unvested restricted stock at September 30, 2016, and changes during the nine months ended September 30, 2016, is presented below: 
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)


The following table summarizes information about stock options outstanding as of June 30, 2022:
Employee
OptionsNumber of
Options		Weighted-Average
Exercise Price		Weighted-Average
Remaining
Contractual
Term (Years)		Aggregate
Intrinsic
Value
Outstanding at December 31, 20214,715 $6.53 
Options Granted1,198 1.26 
Options Exercised— — 
Options Cancelled(532)12.57 
Outstanding at June 30, 20225,381 $4.76 5.25$— 
Vested and exercisable at June 30, 20222,036 $8.12 3.94$— 

The total intrinsic value of stock options exercisable was nil at June 30, 2022 and 2021, respectively. The total intrinsic value of stock options exercised was nil and $0.6 thousand during the six months ended June 30, 2022 and 2021, respectively.

Awards of Restricted Stock Purchase Planand Performance Stock

On February 1, 2012,A summary of the Company establishedCompany’s unvested restricted stock at June 30, 2022, and changes during the six months ended June 30, 2022, is presented below:
Unvested Restricted StockNumber of
Awards		Weighted- Average
Grant Date
Fair Value
Unvested at December 31, 20212,574 $3.57 
Granted979 1.41 
Vested(718)4.30 
Forfeited(173)3.41 
Unvested at June 30, 20222,662 $2.56 

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.

Performance Based Cash Units

Performance based cash units generally vest at the end 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 of the Company’s Common Stock. Employees participate over a six month period through payroll withholdings and may purchase, at the end of the six month period, the Company’s Common Stock at the lower of 85% of the fair market value on the first day of the offering period or the fair market value on the purchase 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: 
26
 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)


16
Table of ContentsContent
SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
(Amounts in tables in thousands, except for per share data or unless otherwise noted)



8. Goodwill and Intangibles
Goodwill
The Company records goodwill which represents the excessA summary of the purchaseCompany’s unvested performance-based cash units at June 30, 2022 and changes during the six months ended June 30, 2022, is presented below:
Unvested Cash UnitsNumber of
Units		Period End Fair Value
Unvested at December 31, 20211,996 $2.44 
Granted— — 
Granted adjustment1
(73)— 
Vested— — 
Forfeited(91)— 
Unvested at June 30, 20221,832 $1.15 
___________________________
1 Includes changes in the unvested units due to performance adjustments

Performance based cash units are measured at the closing stock price at the reporting period end date and are recognized straight line 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 value of the reporting unit below its carrying amount.
requisite service period. The changes in goodwill during the nine months ended September 30, 2016 are as follows: 
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 nineperiod will increase or decrease based on updated fair values of these awards at each reporting date. Unvested units fluctuations are shown as adjustments to units granted in the table above. These fluctuations are based on the percentage achievement of the performance metrics at the end of each reporting period.

10. Income Taxes

The Company recognized an income tax expense of approximately $0.6 million and an income tax benefit of approximately $0.4 million during the six months ended SeptemberJune 30, 20162022 and 2021, respectively. The effective tax rate was approximately 10.3% for the six months ended June 30, 2022, which was lower than the U.S. federal statutory rate primarily due to pre-tax losses in jurisdictions where full valuation allowances have been recorded. Additionally, the Company recognized a discrete income tax benefit in the period associated with the release of certain reserves for uncertain tax benefits. The Company’s effective tax rate was approximately 2.4% for the six months ended June 30, 2021, which was lower than the U.S. federal statutory rate primarily due to pre-tax losses in jurisdictions where full valuation allowances have been recorded, pre-tax losses in jurisdictions which have a zero tax rate, and certain foreign jurisdictions projecting current income tax expense. The Company also recognized a discrete tax benefit associated with the release of certain reserves for uncertain tax benefits during the period. 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, 2022.

On March 11, 2021 the American Rescue Plan Act ("ARPA") was signed into law which is aimed at addressing the continuing economic and health impacts of the COVID-19 pandemic. This legislation relief, along with the previous governmental relief packages provide for numerous changes to current tax law. The ARPA does not have a material impact on the Company’s financial statements in the period ending June 30, 2022.

During 2021 the Internal Revenue Service commenced an audit of certain of the Company’s prior year U.S. federal income tax filings, including the 2013 through 2020 tax years. The audit is currently ongoing and the year ended December 31, 2015 was $35.0 million and $28.6 million, respectively.
The Company’s intangible assets consistwhile receipt of the following: associated refunds would materially improve its financial position, the Company does not believe that the results of this audit will have a material effect on its results of operations.

During the period ended June 30, 2022, the Company received $4.3 million in federal tax refunds. There is no change to the Company’s position on the remaining tax refunds.


27
 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)


11. Restructuring
Estimated future amortization expense
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 its intangible assetsthe Company’s restructuring accrual at June 30, 2022 and changes during the six months ended June 30, 2022, are presented below:
Balance at December 31, 2021ChargesPaymentsOther AdjustmentsBalance at June 30, 2022
Employment termination costs$3,247 $1,704 $(2,736)$(87)$2,128 


12. Earnings per Common Share (“EPS”)

Basic EPS is computed based upon the weighted average number of common 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 used for general corporate purposes, was a $100 million unsecured revolving line of credit that matures on September 27, 2018.  The Company paid a commitment fee in the range of 25 to 35 basis points on the unused balanceaverage market price of the revolving credit facility underCompany’s common stock for the Credit Agreement. Synchronoss had the right to request an increase in the aggregate principal amount of the Credit Facility to $150 million. 

Interest 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 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, 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:
 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 accountedincludes participating securities (Redeemable Convertible Preferred Stock - Participation with Dividends on Common Stock that contain preferred dividend) in the computation of EPS pursuant to the two-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 $230.0 million face valueparticipating securities because they do not share in the losses 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.Company.


18
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)


The 2019 Notes are senior, unsecured obligationsfollowing table provides a reconciliation of the numerator and denominator used in computing basic and diluted net income attributable to common stockholders per common share from operations.

Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Numerator - Basic:
Net income (loss) from operations$7,921 $(2,420)$4,884 $(14,786)
Net (loss) income attributable to redeemable noncontrolling interests(75)(50)(190)286 
Preferred stock dividend(2,519)(21,476)(4,957)(32,006)
Net income (loss) attributable to Synchronoss$5,327 $(23,946)$(263)$(46,506)
Numerator - Diluted:
Net income (loss) from operations attributable to Synchronoss$5,327 $(23,946)$(263)$(46,506)
Net income (loss) attributable to Synchronoss$5,327 $(23,946)$(263)$(46,506)
Denominator:
Weighted average common shares outstanding — basic87,124 44,131 86,031 43,438 
Dilutive effect of:
Shares from assumed conversion of Performance Based Cash Units1,832 — — — 
Options and unvested restricted shares293 — — — 
Weighted average common shares outstanding — diluted89,249 44,131 86,031 43,438 
Earnings (loss) per share:
Basic$0.06 $(0.54)$— $(1.07)
Diluted$0.06 $(0.54)$— $(1.07)
Anti-dilutive stock options excluded— — — — 
Unvested shares of restricted stock awards2,662 2,586 2,662 2,586 


29
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

Non-cancelable agreements

The Company has various non-cancelable arrangements such as services for hosting, support, and software that expire at various dates, with the latest expiration in 2025.

Aggregate annual future minimum payments under non-cancelable agreements as of June 30, 2022 are convertible into sharesas follows:
YearNon-cancelable agreements
2022$10,022 
202316,315 
202413,425 
20259,740 
Total$49,502 

Legal Matters

In the ordinary course of business, the Company is regularly subject to various claims, suits, regulatory inquiries and investigations. The Company 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 subject 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.

In the third quarter of 2017, the SEC and Department of Justice initiated investigations in connection with the June 2017 Announcement and certain transactions that the Company restated in the third quarter of 2018. The Company has received subpoenas, produced documents, and provided additional information to the government in connection with those investigations. On June 22, 2021, the Securities and Exchange Commission (“SEC”) staff verbally notified the Company that the staff has made a preliminary determination to recommend that the SEC initiate an enforcement action against the Company. This is in connection with certain financial transactions that the Company effected in 2015 and 2016 and its disclosure of and accounting for such transactions, which the Company restated in the third quarter of 2018 in its restated annual and quarterly financial statements for 2015 and 2016. That restatement followed the Company’s announcement, on June 13, 2017 (the “June 2017 Announcement”), that certain of its common stock based on a conversion rate of 18.8072 shares per $1,000 principal amount of 2019 Notes which is equivalentprior financial statements would need to an initial conversion price of approximately $53.17 per share. The Company will satisfy any conversion of the 2019 Notes with sharesbe restated. Certain individuals, including certain former members of the Company’s common stock. The 2019 Notes are convertible atmanagement team, received similar notifications. On June 7, 2022 the note holders’ option priorSEC approved the Offer of Settlement and filed an Order Instituting Cease-And-Desist Proceedings pursuant to their maturity and if specified corporate transactions occur. The issue priceSection 21C of the 2019 Notes was equalSecurities Exchange Act of 1934, Making Findings, and Imposing a Cease-And-Desist Order (the “SEC Order”). Pursuant to their face amount.
Holdersthe terms of the 2019 Notes who convert their notesSEC Order, the Company consented to pay a civil penalty in the amount of $12.5 million in equal quarterly installments over two years and to cease and desist from committing or causing any violations of Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and the associated rules thereunder. The expense associated with this settlement of the SEC Order has previously been accrued in the Company’s financial statements. The SEC filed similar orders as to the SEC Order with respect to certain former members of the Company’s management team contemporaneously. Also on June 7, 2022, the SEC filed a civil action against two former members of the Company’s management team, alleging misconduct arising out of the restated transactions that took place in 2015 and 2016 investigated by the SEC in connection with a qualifying fundamental change, as defined in the related indenture,June 2017 Announcement. The Company may be entitledrequired 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 accrued 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 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, several of the Company’s patents. In February 2015, Synchronoss entered into a patent license and settlement agreement with F-Secure Corporation and F-Secure, Inc. whereby 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 stipulation to dismiss the above complaint.
The Company’s 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 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,indemnify the former shareholdersmembers of Miyowa filed an appeal withmanagement in that action. Due to the Court
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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)

inherent uncertainty of Paris, France, appealing the Court’s decision. Althoughlitigation, the Company cannot predict the outcome of the appeal,litigation and can give no assurance that the asserted claims will not have a material adverse effect on its financial position, prospects, or estimate any potential loss ifresults of operations.

Except as set forth above, the outcome is adverse, due to the inherent uncertainties of litigation, the Company believes the positions of Eurowebfund and Bakamar are without merit, and the Company intends to vigorously defend all claims brought by them.
The Company is not currently subject to any other legal proceedings that could have a material adverse effect on its operations; however, itthe Company may from time to time become a party to various legal proceedings arising in the ordinary course of itsour business.

14. Additional Financial Information

Other Income (expense), net

The Company is currentlyfollowing table sets forth the plaintiffcomponents of Other Income (expense), net included in several patent infringement cases. The defendants in severalthe Condensed Consolidated Statements of these cases have filed counterclaims. Although the Company cannot predict the outcomeOperations:
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
FX gains (losses)1
$3,896 $969 $5,614 $(2,304)
Government refunds93 5 93 5 
Income from sale of intangible assets2
— 550 — 550 
Other2
76 52 62 (71)
Total$4,065 $1,576 $5,769 $(1,820)

1 Fair value of the cases at this time due to the inherent uncertaintiesforeign exchange gains and losses
2 Represents an aggregate of litigation, the Company continues to pursue its claims and believes that the counterclaims are without merit, and the Company intends to defend all of such counterclaims.individually immaterial transactions


13. Subsequent Events Review
The Company has evaluated all subsequent events through November 8, 2016.


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 is a leading innovatorprovider of white label cloud, solutions, software-based activation, secure mobility, identitymessaging, digital and network management and secure 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, storageenable our customers to keep subscribers, systems, networks 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 otherin sync. We help our customers to accelerateconnect, engage and monetize value-added services for securesubscribers in more meaningful ways by providing trusted platforms through which end users can sync and broadband networks and connected devices.store
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Our 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. Our 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.
connect with one another and the brands they love. 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 platformsmission is to help reduce fraud, improve cybersecurity detection/prevention 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.

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.
Our 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 allowing us to meet the rapidly changing and converging services and connected devices offered by our customers. Our products, platforms and solutions enable our Enterprise customers to acquire, retain and service subscribers quickly, reliably and cost-effectively with white label and custom-branded solutions. Our 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 our platforms enablecreate new revenue streams, reduce the cost of innovation, and retention opportunities forcaptivate their subscribers.

Our core product sets allow our customers through newto create a positive experience throughout their subscribers’ lifecycle by engaging, onboarding and managing the network to ensure reliable service.

•ENGAGE:
◦Personal Cloud: Backup, manage and engage with content.
◦Advanced Messaging: multi-channel messaging, peer-to-peer (“P2P”) communications and application-to-person (“A2P”) commerce solutions.
◦Email Suite: White label consumer email solutions.

•ONBOARD:
◦Backup and Restore: Backup, view and restore subscriber acquisitions, sale of new devices, accessoriescontent across operating systems and new value-added service offerings in the Cloud, while optimizing their cost of operationsdevices.
◦Content Transfer: Effortlessly move content between mobile devices.

•NETWORK:
◦Total Network Management (“TNM”): integrated application suite that designs, procures, manages and enhancing customer experience. Weoptimizes telecom network infrastructure.

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

Revenues

We generate a substantial portionmost 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 and Digital 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 68.6% and 70.2% of AT&Tnet revenues for the six months ended June 30, 2022 and June 30, 2021, 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 2022 and 2015. AT&T and2021. 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 results of operations.company. However, we believe that the costs incurred and subscriber disruption by Verizon to replace Synchronoss’ solutions would be substantial.

Current Trends Affecting Our Results of Operations

Growth inBusiness from our service provider and enterprise solutions are beingSynchronoss 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.need and subscriber expectation. Such devices include smartphones, connected cars, personal health and wellness devices and connected home.home devices. The need for the content from these devices to be activated and managed and the contents from them to be stored in a common cloud areis also expected to be drivers ofdrive our businessesbusiness in the longlonger term.
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Business from our traditional Synchronoss Cloud products such as Personal Cloud, Mobile Content Transfer, Backup & Transfer and Out of Box Experience (OOBE) are poised to respond to this trend withMessaging business (Email) 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 scalable products for mobile devices.

Secure Mobility. As Enterprise looksare not beholden to increase productivity, it turnsthe objectives of a sponsoring over-the-top (“OTT”) platform. We believe that advanced messaging drives higher subscriber engagement than any other application in the market today and holds the potential to mobile. Yet it finds itself confrontedstimulate 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 serious logistical challengesOTTs which provides a potential opportunity for Synchronoss’ future growth to be driven by the need of not only managing stringent security requirements, but also accommodating the personal devices of its employeesTMT companies including (and especially) MNOs to embrace Messaging as a lower costPlatform (“MaaP”). MaaP will allow TMT and more employee-friendly option. This trendMNOs to converse with subscribers in an efficient, automated way by streamlining the costs and increasing the effectiveness 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 standardsself-care, as well as yielding cross-sell upselling 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 outservice plans, devices, bundles, etc. The Synchronoss Advanced Messaging Platform provides state of “work” selves and “Home” selves – or even in, out or between companies. In addition to being able to manage different personas,the art RCS-driven features including 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 Enterprisesupport advanced Peer to pivot quickly into the regulated BYOD work environmentPeer communications and realize cost savings as well as productivity gains.
Messaging. Messaging as a medium is moving beyond standard email. Messaging is fast becoming an interface for commerce. With the emergence 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 upintroduce new revenue streams driven by commerce and allow Operators to compete with OTT providers in new ways.advertising via Application-to-Person capabilities.
To support our expected growth, which we expect to be driven by thethese favorable industry trends mentioned above, we continueplan 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 also 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, and international mobile carriersDigital 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 Wireless and other CSPsour customers 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 asDiscussion 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.

ResultsCondensed Consolidated Statements of Operations

Three months ended SeptemberJune 30, 20162022 compared to the three months ended SeptemberJune 30, 20152021

The following table presents an overview of our results of operations for the three months ended SeptemberJune 30, 20162022 and 2015:2021 (in thousands):
Three Months Ended June 30,$ Change
202220212022 vs 2021
Net revenues$65,236 $71,532 $(6,296)
Cost of revenues1
22,316 27,142 (4,826)
Research and development13,460 17,197 (3,737)
Selling, general and administrative15,288 21,909 (6,621)
Restructuring charges1,019 877 142 
Depreciation and amortization8,259 8,485 (226)
Total costs and expenses60,342 75,610 (15,268)
Income (loss) from operations$4,894 $(4,078)$8,972 

1    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 $6.3 million to $176.4$65.2 million for the three months ended SeptemberJune 30, 2016,2022, compared to the same period in 2015. Transaction2021. The change in revenue is mainly attributable to increased cloud revenue driven by continued subscriber growth which was more than offset by revenue received from a non-recurring advanced messaging contract in the prior year and subscriptionthe divestiture of the DXP and Activation assets in the quarter.

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Cost of revenues as a percentage of sales were 66% or $117.1 decreased $4.8 million to $22.3 million for the three months ended SeptemberJune 30, 2016,2022, compared to 73% or $109.4 million for the same period in 2015. 2021. The $7.72022 decrease was primarily attributable to continued efforts to streamline our business operations and reduce costs as well as the continued realization of a more profitable revenue mix.

Research and development expense decreased $3.7 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 $13.5 million for the three months ended SeptemberJune 30, 2016,2022, compared to 27% or $41.5 million for the same period in 2015. The increase in professional services2021. The research and license revenue is primarily duedevelopment costs decreased year over year mainly as a result of executed cost savings initiatives to new license agreementsstreamline our workforce and expansion of services with our customers.reduce vendor spend and overhead costs.

Net revenues relatedSelling, general and administrative expense decreased $6.6 million to Activation Solutions decreased $0.3 million to $74.5$15.3 million for the three months ended SeptemberJune 30, 2016,2022, compared to the same period in 2015. Net revenues related to Activation Solutions represented 42%2021. We executed significant strategic cost reductions by optimizing our workforce, reducing vendor spend and lowering facility costs. These strategic cost savings have favorably impacted our current and prior period selling, general and administrative costs.

Restructuring charges were $1.0 million and $0.9 million for the three months ended SeptemberJune 30, 2016, compared to 50% for the same period in 2015. Net revenues related to our Cloud Solutions increased by $25.8 million to $101.9 million for the three months ended September 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, due2022 and 2021, 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 started in March 2016work-force reductions initiated to reduce operating costs and align our resources with our key strategic priorities.

Depreciation and amortization. Depreciation and amortization expense increased $4.9decreased $0.2 million to $24.7$8.3 million for the three months ended SeptemberJune 30, 2016,2022, compared to the same period in 2015. This2021. The 2022 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 efforts to streamline business operations, partially offset by the continued expansion of our platforms andincreased amortization of our newly acquired intangible assets related to our recent acquisitions. capitalized software.

InterestIncome tax. The Company recognized an income.  Interest tax expense of approximately $0.4 million and an income decreased $0.3tax benefit of approximately $0.2 million to $0.3 millionduring the three months ended June 30, 2022 and 2021, respectively. The effective tax rate was approximately 5.2% for the three months ended SeptemberJune 30, 2016, compared to the same period in 2015 due to a change in our portfolio allocations.

Interest expense.  Interest expense increased $0.1 million to $1.6 million for the three months ended September 30, 2016, compared to the same period in 2015.
Other income (expense), net. Other income (expense) increased $0.9 million to $0.2 million for the three 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.  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, 2016,2022, which was higherlower than ourthe U.S. federal statutory rate primarily due to the unfavorable impact ofpre-tax losses in foreign jurisdictions whichwhere full valuation allowances have lowerbeen recorded. Additionally, the Company recognized a discrete income tax rates thanbenefit in the U.S. andperiod associated with the unfavorable impactrelease of the fair market value adjustmentcertain reserves for the contingent consideration obligation related to the Razorsight earn-out. Ouruncertain tax benefits. The Company’s effective tax rate was approximately 53%7.7% for the three months ended SeptemberJune 30, 2015,2021, which was higherlower than ourthe U.S. federal statutory rate primarily due to the unfavorable impact ofpre-tax losses in foreignjurisdictions where full valuation allowances have been recorded, pre-tax losses in jurisdictions which have lowera zero tax rates than the U.S.rate, and the unfavorable impact of transaction costs related to the purchase of Razorsight, which are required to be capitalized forcertain foreign jurisdictions projecting current income tax purposes.expense. The Company also recognized a discrete tax benefit associated with the release of certain reserves for uncertain tax benefits during the period.


Discussion of the Condensed Consolidated Statements of Operations


NineSix months ended SeptemberJune 30, 20162022 compared to the ninesix months ended SeptemberJune 30, 20152021


The following table presents an overview of our results of operations for the ninesix months ended SeptemberJune 30, 20162022 and 2015:2021 (in thousands):
Six Months Ended June 30,$ Change
202220212022 vs 2021
Net revenues$131,102 $137,031 $(5,929)
Cost of revenues1
47,155 55,779 (8,624)
Research and development29,251 34,594 (5,343)
Selling, general and administrative33,185 39,837 (6,652)
Restructuring charges1,704 1,590 114 
Depreciation and amortization16,293 18,352 (2,059)
Total costs and expenses127,588 150,152 (22,564)
Income (loss) from operations$3,514 $(13,121)$16,635 

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


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 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 $5.9 million to $476.7$131.1 million for the ninesix months ended SeptemberJune 30, 2016,2022, compared to the same period in 2015. Transaction2021. The change in revenue is mainly attributable to increased cloud revenue driven by continued subscriber growth which was more than offset by revenue received from a non-recurring advanced messaging contract in the prior year and subscriptionthe divestiture of the DXP and Activation assets and sunsetting certain legacy products in the current period.

Cost of revenues as a percentage of sales were 69% or $330.9 decreased $8.6 million to $47.2 million for the ninesix months ended SeptemberJune 30, 2016 compared to 73% or $306.0 million for the same period in 2015. The 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 31% or $145.7 million for the nine months ended September 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, 20162022, compared to the same period in 2015.2021.  The increase in2022 decrease was primarily attributable to continued efforts to streamline our Cloud Solution performance wasbusiness operations and reduce costs as well as the continued realization of a result of new cloud offerings with newmore profitable revenue mix.

Research 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.
Expenses
Cost of services.  Cost of services increased $45.0development expense decreased $5.3 million to $217.0$29.3 million for the ninesix months ended SeptemberJune 30, 2016,2022, 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.  Research2021. The research and development costs decreased year over year mainly as a result of executed cost savings initiatives to streamline our workforce and reduce vendor spend.

Selling, general and administrativeexpense increased $9.9decreased $6.7 million to $78.4$33.2 million for the ninesix months ended SeptemberJune 30, 2016,2022, compared to the same period in 20152021. The 2022 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 bycost savings initiatives that resulted in a $1.1 million decrease in personnelemployee costs, facilities, and external costs related costs due to the capitalization of qualified software costs.outside consultants and legal fees.


Selling, general and administrative.  Selling, general and administrative expenseRestructuring charges increased $29.2$0.1 million to $89.8$1.7 million for the ninesix months ended SeptemberJune 30, 2016,2022, compared to the same period in 2015. The increase was driven in part by a $13.3 million increase in personnel and related costs 2021, 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 started in March 2016work-force reductions initiated to reduce operating costs and align our resources with our key strategic priorities.

Depreciation and amortization. Depreciation and amortization expense increased $22.8decreased $2.1 million to $74.0$16.3 million for the ninesix months ended SeptemberJune 30, 2016,2022, compared to the same period in 2015,2021. The 2022 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 platformsdata center consolidation project and efforts to streamline business operations, partially offset by the increased amortization of our newly acquired intangible assets related to our recent acquisitions.capitalized software.


Interest expense.  Interest expense increased $0.8 million to $5.0 million for the nine months ended September 30, 2016, compared to the same period in 2015 due to an increase of approximately $0.8 million related to the drawdown from the Amended Credit Facility.

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 million and $25.5 million in relatedan income tax expense of $0.6 million and an income tax benefit of $0.4 million during the ninesix months ended SeptemberJune 30, 20162022 and 2015,2021, respectively. OurThe effective tax rate was approximately 1,143%10.3% for the ninesix months ended SeptemberJune 30, 2016,2022, which was higherlower than ourthe U.S. federal statutory rate primarily due to the unfavorable impact ofpre-tax losses in foreign jurisdictions whichwhere full valuation allowances have lower tax rates thanbeen recorded. Additionally, the U.S., the unfavorable impact of the fair market value adjustment for the Razorsight contingent consideration obligation and the recording ofCompany recognized a non-cashdiscrete income tax provision to establish a valuation allowance. We considered all available evidence, including our historical profitability and projections of future taxable income togetherbenefit in the period associated 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 lossesrelease of certain foreign subsidiaries. Ourreserves for uncertain tax benefits. The Company’s effective tax rate was approximately 42%2.4% for the ninesix months ended SeptemberJune 30, 2015,2021, which was higherlower than ourthe U.S. federal statutory rate primarily due to the unfavorable impact ofpre-tax losses in foreign jurisdictions We review the expected annual effective incomewhere full valuation allowances have been recorded, pre-tax losses in jurisdictions which have a zero tax rate, and make changes oncertain foreign jurisdictions projecting current income tax expense. The Company also recognized a quarterly basis as necessary based ondiscrete tax benefit associated with the release of certain factors such as changes in forecasted annual operating income, changes toreserves for uncertain tax benefits during the actual and forecasted permanent book-to-tax differences, and changes resulting from the impact of tax law changes.period.



Liquidity and Capital Resources

OurAs of June 30, 2022, our principal sourcesources of liquidity has beenwere cash provided by operations and borrowings on our Credit Facility.the remaining proceeds from the financing transactions. Our cash and cash equivalents and marketable securities balance was $144.3$25.5 million at SeptemberJune 30, 2016, a decrease of $89.4 million as compared to the balance at December 31, 2015. This decrease was primarily due to our acquisition 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.2022. We anticipate that our principal uses of cash in the futureand cash equivalents 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 andincluding technology expansion capital expenditures, and working capital.


At SeptemberJune 30, 2016,2022, our non-U.S. subsidiaries held approximately $25.0$4.4 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, financing sources, 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 filing date of this Form 10-Q based on our current business plans. However, given the impact of the COVID-19 pandemic on the economy and our operations as well as geopolitical developments, we will continue to assess our liquidity needs. Given the economic uncertainty as a result of the pandemic, we have taken actions to
35
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 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” in our Annual Report on Form 10-K for the year ended December 31, 2021, some of which are outside of our control.

For further details, see Note 7. Debt and Note 9. Capital Structure of the Notes to Condensed Consolidated Financial Statements in Item 1 of this Form 10-Q.

Discussion of Cash Flows

A summary of net cash flows follows (in thousands):
Six Months Ended June 30,
20222021
Net cash provided by (used in):
Operating activities$6,728 $8,167 
Investing activities(3,768)(11,659)
Financing activities$(8,517)$2,687 

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 provided by operating activities for the six months ended June 30, 2022 was $6.7 million as compared to $8.2 million of cash provided by operating activities for the same period in 2021. In the current period, the Company generated cash from operations mainly driven by continued growth in cloud revenue, certain annual maintenance and support renewals paid in the second quarter and a $4.3 million tax refund received in the second quarter. The prior years cash provided from operations was positively impacted by a non-recurring cash payment for a advanced messaging contract.

Cash used in investingactivities for the six months ended June 30, 2022 was $3.8 million as compared to $11.7 million in cash used in investing activities during the same period in 2021. The cash used for investing activities in the current year and prior year was primarily related to increased investment in product development for our Cloud offering and capitalization of associated labor costs, in addition to annual vendor payments made in the current period. This investment was offset in the current period by the $7.5 million of cash received as part of the DXP and Activation sale.

Cash (used in) provided by financing activities for the six months ended June 30, 2022 was $8.5 million of cash used primarily due to principal and interest payments associated with the redemption of Series B Preferred Stock. In 2021, the net proceeds from our public offering of common stock, Senior Note offering and Series B Preferred Stock transaction was primarily used to fully redeem all outstanding shares of the Company’s Series A Preferred Stock and repay and close the Revolving Credit Facility on June 30, 2021.

Effect of Inflation

Although inflation generally affects us by increasing our cost ofInflationary increases in certain input costs, such as occupancy, labor and benefits, and general administrative costs, have not significantly impacted our results of operations during the six months June 30, 2022 and 2021. We cannot assure you, however, that we will not be affected by general inflation in the future.


36
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, 2022 (in thousands):

Payments Due by Period
Total20222023-20252026-2027Thereafter
Finance lease obligations$791 $182 $590 $19 $— 
Interest50,215 5,908 35,446 8,861 — 
Operating lease obligations47,365 4,829 24,230 14,036 4,270 
Purchase obligations1
49,502 10,022 39,480 — — 
Senior Note Payable141,077 — — 141,077 — 
Total$288,950 $20,941 $99,746 $163,993 $4,270 

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

Uncertain Tax Positions

Unrecognized tax positions of $4.0 million at June 30, 2022 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 inflation has had any material effectthe ultimate settlement of our obligations will materially affect our liquidity. We anticipate that the balance of unrecognized tax benefits will decrease by approximately $0.5 millionover 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 continuing to arise 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.

During the ninesix months ended SeptemberJune 30, 2016 or 2015. 2022, there were no significant changes in our critical accounting policies and estimates discussed in our Form 10-K for the year ended December 31, 2021. 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, 2021 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 Note 2. 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 Linethis Quarterly Report on Form 10-Q.
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Off-Balance Sheet Arrangements

We had no off-balance sheet arrangements as of SeptemberJune 30, 20162022 and December 31, 20152021 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, 2022 and December 31, 2015, which could materially affect our business, financial condition or future results. We believe our exposure associated with these2021 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 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, 20162022 would increase interest income by less than $0.5approximately $0.3 million on an annual basis.

Borrowings under our credit facility, are at variable rates
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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, 2022.

Changes in internal controls over financial reportingInternal Control Over Financial Reporting

On March 1, 2016, we completed our acquisition of Openwave Messaging, Inc. (“Openwave”). SEC guidance permits management to omit an assessment of an acquired business' 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, thereThere were no changes in our internal control over financial reporting identified in management's evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the quarter ended September 30, 2016period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our 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 effectimpact our results of operations, financial condition or cash flows see Note 13. Commitments, Contingencies and Other included in Part I, Item 1. “Notes to Condensed Consolidated Financial Statements (unaudited)” of this Quarterly Report on our operations; however, we may from time to time become a party to various legal proceedings arising in the ordinary course 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 claims and believe that any counterclaims are without merit, and we intend to defend against all such counterclaims.Form 10-Q.

ITEM 1A. RISK FACTORS

In addition to the other informationOther than set forth in this report, you should carefully consider thebelow, there have been no material changes to our risk factors discussedas previously disclosed in Part I, “ItemItem 1A. Risk Factors”included in our Annual Report on Form 10-K for the year ended December 31, 2015,2021.

We are subject to credit risk and other risks associated with our accounts receivable securitization facility (the “A/R Facility”).

We entered into the A/R Facility with Norddeutsche Landesbank Girozentrale (“NLG”) in June 2022 that permits borrowings of up to $15.0 million outstanding from time to time through June 2025 against our existing and future account receivables. As of June 30, 2022, there were no outstanding obligations under the A/R Facility.

The amounts available under the A/R Facility depend the size of our accounts receivable. If these amounts are less than we forecast, this could negatively affect our expected borrowing capacity and our ability to satisfy any obligations as they become due.

The willingness of NLG to make advances to us is subject to customary conditions for financings of this nature. If we are unable to satisfy those conditions, NLG could refrain from providing financing to us, and we may experience a material and adverse loss of liquidity. The A/R Facility contains representations and warranties, affirmative and negative covenants, and events of default that are customary for financings of this type. If we breach certain of our debt covenants under the A/R Facility, we will be unable to utilize the full borrowing capacity under the A/R Facility and our lenders could require us to repay the debt immediately and could immediately take possession of the receivables securing such debt. In addition, because our Senior Notes and A/R Facility contain cross-default and cross-acceleration provisions with other debt, if any debtholder were to declare its loan due and payable as a result of a default, the holders of the Senior Notes or NLG, might be able to require us to pay those debts immediately.

If NLG terminates the A/R Facility, we may experience a material and adverse loss of our liquidity, which could have a material adverse effect on financial, results of operations and cash flows.

Due to the global nature of our operations, political or economic changes or other factors in a specific country or region could harm our operating results and financial condition.

We conduct significant sales and customer support operations in countries around the world. As such, our growth depends in part on our increasing sales into emerging countries. We also depend on, and many of our customers depend on, non-U.S. operations of our contract manufacturers, component suppliers and distribution partners. Emerging countries in the aggregate experienced a decline in orders during fiscal 2021 and certain prior periods. We continue to assess the sustainability of any improvements in these countries and there can be no assurance that our investments in these countries will be successful. Our future results could be materially adversely affected by a variety of political, economic or other factors relating to our operations inside and outside the United States, including impacts from global central bank monetary policy; issues related to the political relationship between the United States and other countries that can affect the willingness of customers in those countries to purchase products from companies headquartered in the United States; business interruptions resulting from regional or larger scale conflicts or geo-political actions; the impact of the COVID-19 or other public health epidemics or concerns on our customer’s component suppliers, and the challenging and inconsistent global macroeconomic environment, any
40
or all of which could have a material adverse effect on our operating results and financial condition, including, among others things:

•Current or future supply chain interruptions;
•Foreign currency exchange rates;
•Political or social unrest or instability, including effects of the recent conflict between Russia and Ukraine, and the possibility of a wider European or global conflict, and global sanctions imposed in response thereto;
•Economic instability or weakness, including inflation, or natural disasters in a specific country or region, including the current economic or health challenges in China and global economic ramifications of Chinese economic difficulties;
•Environmental and trade protection measures and other legal and regulatory requirements, some of which may affect our ability to import our products, to export our products from, or sell our products in various countries;
•Political considerations that affect service provider and government spending patterns;
•Health or similar issues and the responses thereto, such as a pandemic or epidemic, including the COVID-19 pandemic and responses taken thereto;
•Natural disasters, terrorism, war or other military conflict, telecommunication and electrical failures;
•Difficulties in staffing and managing international operations; or
•Adverse tax consequences, including imposition of withholding or other taxes on our global operations.

Concerns over economic recession, the COVID-19 pandemic, interest rate increases and inflation, supply chain delays and disruptions, policy priorities of the U.S. presidential administration, trade wars, unemployment, or prolonged government shutdown may contribute to increased volatility and diminished expectations for the economy and markets. Additionally, concern over geopolitical issues may also contribute to prolonged market volatility and instability. For example, the conflict between Russia and Ukraine could lead to disruption, instability and volatility in global markets and industries. The U.S. government and other governments in jurisdictions have imposed severe economic sanctions and export controls against Russia and Russian interests, have removed Russia from the Society for Worldwide Interbank Financial Telecommunication system, and have threatened additional sanctions and controls. The impact of these measures, as well as potential responses to them by Russia, is unknown.

We must recruit and retain our key management and other key personnel and our failure to recruit and retain qualified employees could have a negative impact on our business.

We believe that our success depends in part on the continued contributions of our senior management and other key personnel to generate business and execute programs successfully. In addition, the relationships and reputation that these individuals have established and maintain with our customers and within the industries in which we operate contribute to our ability to maintain good relations with our customers and others within those industries. The loss of any members of senior management or other key personnel could materially impair our ability to identify and secure new contracts and otherwise effectively manage our business. In order to attract and retain executives and other key employees in a competitive marketplace, we must provide a competitive compensation package, including cash- and equity-based compensation. If we do not obtain the stockholder approval needed to continue granting equity compensation in a competitive manner, our ability to attract, retain, and motivate executives and key employees could be weakened. Further, in the technology industry, there is substantial and continuous competition for highly skilled business, product development, technical and other personnel. We may be unable to attract or retain qualified personnel because their salaries and other compensation may increase to levels that we are unwilling or unable to provide. Competition for qualified personnel at times can be intense and as a result we may not be successful in attracting and retaining the personnel we require, which could have a material adverse effect on our ability to meet our commitments and new product delivery objectives. If we are unable to maintain or expand our direct sales capabilities, we may not be able to generate anticipated revenues. In addition, if we are unable to maintain or expand our product development capabilities, we may not be able to meet our product development goals.Further, we rely on the expertise and experience of our senior management team. Although we have employment agreements with our executive officers, none of them or any of our other management personnel is obligated to remain employed by us. The loss of services of any key management personnel could lower productive output, interrupt our strategic vision and make it more difficult to pursue our business goals successfully.

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Economic, political and market conditions can adversely affect our results of operations, financial condition and business.

Our business is influenced by a range of factors that are beyond our control and that we have no comparative advantage in forecasting. These include but are not limited to general economic and business conditions, the overall demand for cloud-based products and services, general political developments and currency exchange rate fluctuations. Economic uncertainty, including interest rate increases and inflation, may exacerbate negative trends in consumer spending and may negatively impact the businesses of certain of our customers, which may cause a reduction in their use of our platforms or increase the likelihood of defaulting on their payment obligations, and therefore cause a reduction in our revenues. These conditions and uncertainty about future economic conditions may make it challenging for us to forecast our operating results, make business decisions and identify the risks that may affect our business, financial conditions and results of operations and may result in a more competitive environment, resulting in possible pricing pressures.Our business could be affected by acts of war or other military actions, terrorism, natural disasters and the widespread outbreak of infectious diseases. Current world tensions could escalate, and this could have unpredictable consequences on the world economy and on our business.

The COVID-19 pandemic has created significant uncertainty in the global economy. The COVID-19 pandemic and health measures taken by governments and private industry in response to the pandemic, including stay-at-home orders, restrictions on business operations, and travel restrictions, have had significant negative effects on the economy, including disruptions impacting various supply chains. Continued uncertainty about the pandemic, associated economic consequences, and potential relief measures may have a long-term adverse effect on the economy, our sellers, customers, suppliers, and our business. For example, we are currently subletting some of our office space. An economic downturn or our work from home practices may cause us to need less office space than we are contractually committed to leasing and prevent us from finding subtenants for such unused office space, causing us to pay for unused office space. Rising tensions in the geopolitical climate, including effects of the recent conflict between Russia and Ukraine, and the possibility of a wider European or global conflict, and global sanctions imposed in response thereto, have created significant uncertainty in the global economy. These or any further political or governmental developments or health concerns in countries could result in social, economic and labor instability.If, as a result of such events, we experience a reduction in demand for our products, platforms or services, or the supply of products or components to our customers, our business, results of operations and financial condition may be materially and adversely affected.

We have, and in the future may be, the target of stockholder derivative complaints or future results. The risks described in our Form 10-K are not the only risks we face. Additional risks and uncertainties not currently known to us orother securities related legal actions that we currently deem to be immaterial also may materiallycould adversely affect our results of operations and our business.

We have, and in the future may be, the target of stockholder derivative complaints or other securities related legal actions.The existence of any litigation may have an adverse effect on our reputation with referral sources and our customers themselves, which could have an adverse effect on our results of operations and financial condition.The outcome and amount of resources needed to respond to, defend or resolve lawsuits is unpredictable and may remain unknown for long periods of time. Our exposure under these matters may also include our indemnification obligations, to the extent we have any, to current and former officers and directors and, in some cases former underwriters, against losses incurred in connection with these matters, including reimbursement of legal fees and other expenses. For instance, on June 7, 2022, the SEC filed a civil action against two former members of the Company’s management team, alleging misconduct arising out of the restated transactions that took place in 2015 and 2016 investigated by the SEC in connection with the June 2017 Announcement. We may be required to indemnify these individuals in connection with such action. Although we maintain insurance for claims of this nature, our insurance coverage does not apply in all circumstances and may be denied or insufficient to cover the costs related to the class action and stockholder derivative lawsuits. In addition, future lawsuits or legal claims involving us may increase our insurance premiums, deductibles or co-insurance requirements or otherwise make it more difficult for us to maintain or obtain adequate insurance coverage on acceptable terms, if at all. Moreover, adverse publicity associated with negative developments in any such legal proceedings could decrease customer demand for our services. As a result, future lawsuits involving us, or our officers or directors, could have a material adverse effect on our business, reputation, financial condition, and/results of operations, liquidity and the trading price of our common stock.

Our stock price may continue to experience significant fluctuations and could subject us to litigation.

Our stock price, like that of other technology companies, continues to fluctuate greatly. Our stock price, and demand for our stock, can be affected by many factors, such as unanticipated changes in management, quarterly increases or operating results.  If any ofdecreases in our earnings, speculation in the risks actually occur,investment community about our business, financial condition or results of operations and changes in
42
revenue or earnings estimates, announcement of new services, technological developments, alliances, or acquisitions by us. Additionally, the price of our common stock may continue to fluctuate greatly in the future due to factors that are non-company specific, such as the decline in the United States and/or international economies, acts of terror against the United States or other jurisdictions where we conduct business, war or other military conflict or due to a variety of company specific factors, including quarter to quarter variations in our operating results, shortfalls in revenue, gross margin or earnings from levels projected by securities analysts and the other factors discussed in these risk factors. Concerns over economic recession, the COVID-19 pandemic, interest rate increases and inflation, supply chain delays and disruptions, policy priorities of the U.S. presidential administration, trade wars, unemployment, or prolonged government shutdown may contribute to increased volatility and diminished expectations for the economy and markets. Additionally, concern over geopolitical issues may also contribute to prolonged market volatility and instability. The U.S. government and other governments in jurisdictions have imposed severe economic sanctions and export controls against Russia and Russian interests, have removed Russia from the SWIFT system, and have threatened additional sanctions and controls. The impact of these measures, as well as potential responses to them by Russia, is unknown. In addition, if the market for technology stocks or the stock market in general experiences uneven investor confidence, the market price of our common stock could bedecline for reasons unrelated to our business, operating results or financial condition. Fluctuation in market price and demand for our common stock may limit or prevent investors from readily selling their shares of common stock and may otherwise negatively affected. In that case,affect the tradingliquidity of our common stock. Causes of volatility in the market price of our stock could decline,subject us to securities class action litigation. We were previously, and may in the future be, the subject of lawsuits that could require us to incur substantial costs defending against those lawsuits and divert the time and attention of our stockholders may lose part or all of their investment.management.



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
Incorporated by Reference
Exhibit No.DescriptionFormFile No.ExhibitFiling DateFiled Herewith
3.1
Restated Certificate of Incorporation of the Registrant.
S-1333-1320803.2May 9, 2006
3.28-K001-405743.1June 23, 2022
3.3
Amended and Restated Bylaws of the Registrant.
S-1333-1320803.4May 9, 2006
3.4
Amendment No. 1 to Amended and Restated Bylaws of the Registrant.
8-K000-520493.2February 20, 2018
3.5
Amendment No. 2 to the Amended and Restated Bylaws of the Registrant.
8-K000-520493.3June 30, 2021
10.1X
10.2
Receivables Purchase Agreements, dated as of June 22, 2022, among Synchronoss Technologies, Inc., SN Technologies, LLC, Norddeutsche Landesbank Girozentrale, the purchasers party thereto, the group agents party thereto and the originators party thereto.
8-K001-4057410.1June 23, 2022
10.3
Purchase and Sale Agreements, dated as of June 22, 2022, between Synchronoss Technologies, Inc. and SN Technologies, LLC.
8-K001-4057410.2June 23, 2022
10.4
Administration Agreement, dated as of June 22, 2022, between Synchronoss Technologies, Inc. and Finacity Corporation.
8-K001-4057410.3June 23, 2022
10.5
Performance Guaranty, dated as of June 22, 2022, made by Synchronoss Technologies, Inc. in favor of Norddeutsche Landesbank Girozentrale.
8-K001-4057410.4June 23, 2022
31.1
Certification of Principal Executive Officer pursuant to Rule 13a‑14(a) of the Exchange Act, as adopted pursuant to section 302 of the Sarbanes‑Oxley Act of 2002.
X
31.2
Certification of Principal Financial Officer pursuant to Rule 13a‑14(a) of the Exchange Act, as adopted pursuant to section 302 of the Sarbanes‑Oxley Act of 2002.
X
32.1
Certification of Principal Executive Officer pursuant to Rule 13a‑14(b) of the Exchange Act and section 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes‑Oxley Act of 2002.
X
32.2
Certification of Principal Financial Officer pursuant to Rule 13a‑14(b) of the Exchange Act and section 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes‑Oxley Act of 2002.
X
101.INSXBRL Instance DocumentX
101.SCHXBRL Schema DocumentX
101.CALXBRL Calculation Linkbase DocumentX
101.DEFXBRL Taxonomy Extension Definition LinkbaseX
101.LABXBRL Labels Linkbase DocumentX
101.PREXBRL Presentation Linkbase DocumentX


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Exhibit No.Description
3.2Restated Certificate of Incorporation of the Registrant, incorporated by reference to Registrant’s Registration Statement on Form S-1 (Commission File No. 333-132080).
3.4Amended and Restated Bylaws of the Registrant, incorporated by reference to Registrant’s Registration Statement on Form S-1 (Commission File No. 333-132080).
4.2Form of the Registrant’s Common Stock certificate, incorporated by reference to Registrant’s Registration Statement on Form S-1 (Commission File No. 333-132080).
10.8Amended and Restated Credit Agreement dated as of July 7, 2016 between the Registrant and Wells Fargo Bank, National Association, as Administrative Agent
10.8.1Form 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.
31.1Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Exchange Act, as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002
31.2Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Exchange Act, as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002
32.1Certification of Chief Executive Officer pursuant to Rule 13a-14(b) of the Exchange Act and section 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002
32.2Certification of Chief Financial Officer pursuant to Rule 13a-14(b) of the Exchange Act and section 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002
101.INSXBRL Instance Document
101.SCHXBRL Schema Document
101.CALXBRL Calculation Linkbase Document
101.DEFXBRL Taxonomy Extension Definition Linkbase
101.PREXBRL Presentation Linkbase Document
101.LABXBRL Taxonomy Extension Label Linkbase


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/ Jeff Miller
Jeff Miller
/s/Stephen G. Waldis
Stephen G. Waldis
Chairman of the Board of Directors and
Chief Executive Officer
(Principal executive officer)Executive Officer)
/s/ Taylor Greenwald
Taylor Greenwald
/s/Karen L. Rosenberger
Karen L. Rosenberger
Executive Vice President, Chief Financial Officer
and Treasurer

November 8, 2016


August 9, 2022
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