Table of Contents



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 September 30, 2016March 31, 2024
 
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
Delaware06-1594540
(State or other jurisdiction of

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

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

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

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑x No ☐¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☑x No ☐¨
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ☑☐
Accelerated filer☐x
Non-accelerated filer☐
☐
Smaller Reporting Company☐
Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑x
Shares outstandingSecurities registered pursuant to Section 12(b) of the Registrant’s common stock:
Act:
Title of each class Trading Symbol(s)Name of each exchange on which registered
Common Stock, $.0001 par value
SNCRThe Nasdaq Stock Market, LLC
Class8.375% Senior Notes due 2026SNCRLOutstanding at October 31, 2016
Common stock, $0.0001 par value45,326,842The Nasdaq Stock Market, LLC

As of May 6, 2024, there were 10,792,176 shares of common stock issued and outstanding.


Table of Contents
SYNCHRONOSS TECHNOLOGIES, INC.
FORM 10-Q INDEX
PAGE NO.Page No.
3
Item 1. 
3
3
4
5
6
57
68
8
8
11
Note 4. Divestitures and Discontinued Operations
12
Note 5. Accounts Receivable Securitization Facility
15
16
16
16
20
22
22
24
27
27
28
30
30
31
31
Item 2.
2132
Item 3.
3237
Item 4.
3238
39
PART II. Item 1.
3339
Item 1A.
39
Item 1. 2.
33
Item 1A. 
Risk Factors
33
Item 2. 
Unregistered Sales of Equity Securities and Use of Proceeds
3439
Item 3.
3439
Item 4.
3439
Item 5.
39
Item 5. 6.
3440
Exhibits41
35
SIGNATURES 
36




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)
(In thousands)
 March 31, 2024December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents$19,100 $24,572 
Accounts receivable, net22,482 23,477 
Prepaid & other current assets32,314 33,953 
Total current assets73,896 82,002 
Non-current assets:
Property and equipment, net3,559 3,673 
Operating lease right-of-use assets13,867 14,791 
Goodwill182,150 183,908 
Intangible assets, net21,300 22,214 
Other assets, non-current3,731 3,749 
Total non-current assets224,607 228,335 
Total assets$298,503 $310,337 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$6,207 $7,475 
Accrued expenses33,036 39,127 
Deferred revenues, current656 1,095 
Total current liabilities39,899 47,697 
Long-term debt, net of debt issuance costs136,649 136,215 
Deferred tax liabilities3,213 3,207 
Leases, non-current21,953 23,593 
Other liabilities, non-current1,529 1,691 
Total liabilities203,243 212,403 
Commitments and contingencies:
Series B Non-Convertible Perpetual Preferred Stock, $0.0001 par value; 150 shares authorized, 61 and 61 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively58,802 58,802 
Redeemable noncontrolling interest12,500 12,500 
Stockholders’ equity:
Common stock, $0.0001 par value; 16,667 shares authorized, 10,315 and 10,314 issued and outstanding at March 31, 2024 and December 31, 2023, respectively1 1 
Additional paid-in capital482,492 483,527 
Accumulated other comprehensive loss(31,841)(25,732)
Accumulated deficit(426,694)(431,164)
Total stockholders’ equity23,958 26,632 
Total liabilities and stockholders’ equity$298,503 $310,337 
 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.

3
Table of Contents
SYNCHRONOSS TECHNOLOGIES, INCINC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOMEOPERATIONS
(Unaudited)
(In (In thousands, except per share data)

Three Months Ended March 31,
Three Months Ended March 31,
Three Months Ended March 31,
2024
Net revenues
Net revenues
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
Costs and expenses:
Costs and expenses:
Cost of revenues1
Cost of revenues1
Cost of revenues1
Research and development
Research and development
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
 —
Selling, general and administrative
Selling, general and administrative
Restructuring charges
Restructuring charges
Restructuring charges977
 399
 5,139
 5,090
Depreciation and amortization24,692
 19,754
 74,009
 51,221
Depreciation and amortization
Depreciation and amortization
Total costs and expenses163,212

128,580

471,658

357,399
Income from operations13,209
 22,294
 5,000
 64,221
Total costs and expenses
Total costs and expenses
Income (loss) from operations
Income (loss) from operations
Income (loss) from operations
Interest income
Interest income
Interest income271
 546
 1,492
 1,483
Interest expense(1,596) (1,448) (5,006) (4,208)
Interest expense
Interest expense
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)
Other income (expense), net
Other income (expense), net
Income (loss) from continuing operations, before taxes
Income (loss) from continuing operations, before taxes
Income (loss) from continuing operations, before taxes
Provision for income taxes
Provision for income taxes
Provision for income taxes
Net income (loss) from continuing operations
Net income (loss) from continuing operations
Net income (loss) from continuing operations
Discontinued operations (Note 4):
Discontinued operations (Note 4):
Discontinued operations (Note 4):
Loss from discontinued operations, before taxes
Loss from discontinued operations, before taxes
Loss from discontinued operations, before taxes
Provision for income taxes
Provision for income taxes
Provision for income taxes
Net loss from discontinued operations
Net loss from discontinued operations
Net loss from discontinued operations
Net income (loss)4,833
 9,645
 (13,553) 35,360
Net loss attributable to noncontrolling interests(2,843) —
 (8,836) —
Net income (loss)
Net income (loss)
Net (loss) income attributable to redeemable noncontrolling interests
Net (loss) income attributable to redeemable noncontrolling interests
Net (loss) income attributable to redeemable noncontrolling interests
Preferred stock dividend
Preferred stock dividend
Preferred stock dividend
Net income (loss) attributable to Synchronoss
Net income (loss) attributable to Synchronoss
Net income (loss) attributable to Synchronoss$7,676
 $9,645
 $(4,717) $35,360
       
Net income (loss) per common share attributable to Synchronoss:  
  
  
Earnings (loss) per share:
Earnings (loss) per share:
Earnings (loss) per share:
Basic:
Basic:
Basic:
Net income (loss) from continuing operations
Net income (loss) from continuing operations
Net income (loss) from continuing operations
Net loss from discontinued operations
Net loss from discontinued operations
Net loss from discontinued operations
Basic
Basic
Basic
Diluted:
Diluted:
Diluted:
Net income (loss) from continuing operations
Net income (loss) from continuing operations
Net income (loss) from continuing operations
Net loss from discontinued operations
Net loss from discontinued operations
Net loss from discontinued operations
Diluted
Diluted
Diluted
Weighted-average common shares outstanding:
Weighted-average common shares outstanding:
Weighted-average common shares outstanding:
Basic
Basic
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
Diluted

*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.



4
Table of Contents
SYNCHRONOSS TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(Unaudited) (In thousands)

Three Months Ended March 31,
20242023
Net income (loss)$4,475 $(10,931)
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments(6,109)4,570 
Comprehensive loss(1,634)(6,361)
Comprehensive (loss) income attributable to redeemable noncontrolling interests(5)14 
Comprehensive loss attributable to Synchronoss$(1,639)$(6,347)

See accompanying notes to condensed consolidated financial statements.
5
Table of Contents
SYNCHRONOSS TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited) (In thousands)
Three Months Ended March 31, 2024
Common Stock
SharesPar ValueAdditional Paid-In CapitalAccumulated Other Comprehensive (Loss) IncomeAccumulated deficitTotal Stockholders' Equity
Balance at December 31, 202310,314 $1 $483,527 $(25,732)$(431,164)$26,632 
Stock based compensation— — 1,089 — — 1,089 
Issuance of restricted stock1 — — — — — 
Preferred stock dividend— — (2,129)— — (2,129)
Net income (loss)— — — — 4,475 4,475 
Non-controlling interest— — 5 — (5)— 
Total other comprehensive income (loss)— — — (6,109)— (6,109)
Balance at March 31, 202410,315 $1 $482,492 $(31,841)$(426,694)$23,958 

Three Months Ended March 31, 2023
Common Stock
SharesPar ValueAdditional Paid-In CapitalAccumulated Other Comprehensive (Loss) IncomeAccumulated deficitTotal Stockholders' Equity
Balance at December 31, 202210,137 $1 $488,856 $(44,131)$(376,629)$68,097 
Stock based compensation— — 1,314 — — 1,314 
Issuance of restricted stock299 — — — — — 
Preferred stock dividend— — (2,474)— — (2,474)
Shares withheld for taxes in connection with issuance of restricted stock— — (1)— — (1)
Net loss— — — — (10,931)(10,931)
Non-controlling interest— — (14)— 14 — 
Total other comprehensive income (loss)— — — 4,570 — 4,570 
Balance at March 31, 202310,436 $1 $487,681 $(39,561)$(387,546)$60,575 

See accompanying notes to condensed consolidated financial statements.
6
Table of Contents
SYNCHRONOSS TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In (In thousands)
Three Months Ended March 31,
20242023
Operating activities:
Net income (loss) from continuing operations$4,475 $(8,589)
Net loss from discontinued operations— (2,342)
Adjustments to reconcile net income (loss) to net cash from operating activities:
Depreciation and amortization4,359 7,520 
Amortization of debt issuance costs408 370 
Amortization of bond discount26 23 
Stock-based compensation1,110 1,739 
Other, net(3,950)2,786 
Changes in operating assets and liabilities:
Accounts receivable, net918 (845)
Prepaid expenses and other current assets1,627 13 
Accounts payable(1,149)(2,348)
Accrued expenses(6,158)3,457 
Other assets(5)221 
Deferred revenues(422)1,365 
Other liabilities(712)(2,075)
Net cash provided by operating activities527 1,295 
Investing activities:
Purchases of fixed assets(517)(876)
Additions to capitalized software(3,286)(4,594)
Net cash used in investing activities(3,803)(5,470)
Financing activities:
Taxes paid on withholding shares— (1)
Drawdown on A/R Facility3,000 — 
Repayment of A/R Facility(3,000)— 
Series B Preferred dividend paid in cash(2,129)(2,298)
Net cash used in financing activities(2,129)(2,299)
Effect of exchange rate changes on cash(67)113 
Net decrease in cash and cash equivalents(5,472)(6,361)
Beginning cash and cash equivalents of continuing operations24,572 18,310 
Beginning cash and cash equivalents of discontinued operations— 3,611 
Beginning cash and cash equivalents24,572 21,921 
Ending cash and cash equivalents of continuing operations19,100 12,921 
Ending cash and cash equivalents of discontinued operations— 2,639 
Ending cash and cash equivalents$19,100 $15,560 
 Nine Months Ended September 30,
 2016 2015
Operating activities:  (As Adjusted)
Net (loss) income$(13,553) $35,360
Adjustments to reconcile net (loss) income to net cash provided by operating activities: 
  
Depreciation and amortization expense74,009
 51,221
Amortization of debt issuance costs1,197
 1,125
Loss on disposals(70) —
Amortization of bond premium1,214
 1,261
Deferred income taxes5,537
 (11,772)
Non-cash interest on leased facility763
 694
Stock-based compensation25,407
 21,234
Contingent consideration obligation7,299
 (1,532)
Changes in operating assets and liabilities: 
  
Accounts receivable, net of allowance for doubtful accounts(72,871) (40,442)
Prepaid expenses and other current assets 1
5,315
 8,020
Other assets4,558
 (670)
Accounts payable(5,679) 106
Accrued expenses 1
4,070
 10,497
Other liabilities(6,596) (138)
Deferred revenues25,884
 1,610
Net cash provided by operating activities56,484
 76,574
    
Investing activities: 
  
Purchases of fixed assets(46,189) (53,461)
Purchases of intangible assets—
 (1,200)
Purchases of marketable securities available-for-sale(12,841) (105,817)
Maturities of marketable securities available-for-sale76,979
 75,370
Businesses acquired, net of cash(98,428) (83,592)
Net cash used in investing activities(80,479) (168,700)
    
Financing activities: 
  
Proceeds from the exercise of stock options9,382
 16,752
Taxes paid on withholding shares 1
(7,176) (15,472)
Payments on contingent consideration obligation—
 (4,468)
Debt issuance costs related to convertible notes(1,346) —
Borrowings on revolving line of credit144,000
 —
Repayment of revolving line of credit(106,000) —
Repurchases of common stock(40,025) —
Proceeds from the sale of treasury stock in connection with an employee stock purchase plan2,183
 1,902
Repayments of capital lease obligations(2,933) (1,772)
Net cash used in financing activities(1,915) (3,058)
Effect of exchange rate changes on cash1,595
 2,569
Net decrease in cash and cash equivalents(24,315) (92,615)
Cash and cash equivalents at beginning of period147,634
 235,967
Cash and cash equivalents at end of period$123,319
 $143,352
    
Supplemental disclosures of cash flow information: 
  
Issuance of common stock in connection with Openwave acquisition$22,000
 $—
Cash paid for income taxes$3,935
 $24,052
Cash paid for interest$1,636
 $3,918


1See Note 2 for discussion of the adoption of ASU 2016-09.
See accompanying notes to condensed consolidated financial statements.

5
7
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)



Note 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 management and secure messaging for mobile carriers, enterprises, retailers and OEMs across the globe. Synchronoss’ software provides innovative service provider and enterprise solutions that drive billions of transactions on a wide range of connected devices across the world’s leading networks. The Company’s solutions include: activation and provisioning software for devices and services cloud-based sync, backup, storagethat enable 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.in sync.
Synchronoss’ Activation Software, Synchronoss Personal Cloud™ and Enterprise products and platforms provide end-to-end seamless integration between customer-facing channels/applications, communication services, or devices and “back-office” infrastructure-related systems and processes. The Company’s customers rely on the Company’s solutions and technology to automate the process of activation and content and settings management for their subscribers’ devices while delivering additional communication services.
The Synchronoss Activation solution navigates the variety of complex back-end systems of CSPs to provide a best-in-class ordering system by orchestrating the workflow and consolidated automated customer care services. This allows CSPs using the Company’s platforms to realize the full benefits of their offerings. The platforms also support, among other automated transaction areas, credit card billing, inventory management, and trouble ticketing. In addition to this, the platform supports customer activation related transactions and other services which include managing access service requests, local service requests, local number portability, and directory listings.

The Synchronoss Personal Cloud™CloudTM solution seamlessly transfersis designed to create an engaging and trusted customer experience through ongoing content from an old devicemanagement and engagement. The Synchronoss Personal CloudTM platform is a secure and highly scalable, white label platform that allows our customers’ subscribers to a new device, syncs, backs upbackup and connects consumer’s content from multiple smart devices to the Company’s cloud platform. This allows carrier customers to protect, engage with, and manage their growing cache of personally generated, mobilepersonal content over long periods of time.
The Synchronoss Enterprise solutions 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 businessesgives our operator customers the ability to be sure the correct personincrease average revenue per user (“ARPU”) and reduce churn.

Our Synchronoss Personal CloudTM platform is doing the transaction.  The secure mobility platforms help users safelyspecifically designed to support smartphones, tablets, desktops computers, and securely storelaptops.

Synchronoss’ Messaging platform (Owned and share important data. The solutions are based on understanding assumptions on the behaviors of individualsoperated 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,October 31, 2023) had powered mobile messaging and notes.
Synchronossmailboxes for hundreds of millions of telecommunication subscribers. Our Advanced Messaging isplatform had been a powerful, secure, intelligent, white label messaging platform that expanded capabilities for communications service provider and multi-service providers and offersto offer P2P messaging via Rich Communications Services (“RCS”). Our Mobile Messaging Platform (“MMP”) provided a full range of deployment options. The platform can be deployed fully integrated with on premise systems, through hybrid deployment support,single standard ecosystem 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 provisioningonboarding and management integrationto brands, advertisers and message wholesalers.

The Synchronoss NetworkX (Owned and operated through October 31, 2023) products had provided operators with Nagios for monitoringthe tools and alerts) with support for smartphones, tabletssoftware to design their physical network, streamlined their infrastructure purchases, and connected devices (supportmanaged and optimized comprehensive network expenses for leading protocols including iCal, CalDAV, CardDAV, EAS, IMAP/IDLE), Native Mobile App for iOStop tier carriers around the globe.

On October 31, 2023, Synchronoss Technologies, Inc. entered into an Asset Purchase Agreement with Lumine Group Software Solutions (Ireland) Limited, pursuant to which the Company sold its Messaging and Android for mail, contacts, calendar and task management.

6
Table of Contents
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 areNetworkX businesses. This transaction represented a strategic shift designed to be carrier-grade, highly available, flexiblemaximize shareholder value and scalableallow the Company to enable multiple converged communication servicessolely focus on providing cloud-centric solutions. In connection with the sale transaction, the Company determined its Messaging and NetworkX Businesses qualified for discontinued operations accounting treatment in accordance with ASC 205-20. Accordingly, the operating results of, and costs to be managed across multiple distribution channels including e-commerce, m-commerce, telesales, customer stores, indirectseparate the Messaging and other retail outlets. Synchronoss' offerings allow itNetworkX businesses are reported in Net loss from discontinued operations, net of taxes in the Consolidated Statements of Operations for prior periods presented. There were no assets and liabilities related to meetdiscontinued operations as of March 31, 2024 and December 31, 2023, as all balances were transferred to Lumine Group upon sale. The notes to the rapidly changingfinancial statements have been adjusted on a retrospective basis. For additional information, see Note 4. Divestitures 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 Discontinued Operationsof the Company’s platforms enable new revenue streams and retention opportunities for the Company’s customers through new subscriber acquisitions, saleNotes to Consolidated Financial Statements in Item 1 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.this Form 10-Q.

Note 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. 2023. The results of operations for the three months ended March 31, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024.

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 subsidiariesdoes not have a controlling
8
Table of Content
SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
(Amounts in tables in thousands, except for per share data or investmentsunless otherwise noted)

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

Unless otherwise noted, tables are presented in these consolidated financial statements shouldU.S. dollars in thousands. Certain columns and rows may not necessarily be taken as indicativeadd due to the use of results thatrounded numbers. Percentages presented are calculated from the underlying numbers in thousands. Earnings per share amounts are computed independently for earnings from continuing operations, earnings from discontinued operations and net earnings. As a result, the sum of per-share amounts may be expectednot equal the total. We have reclassified certain prior year amounts to conform with current year presentation. Unless otherwise noted, all amounts and disclosures included in the Notes to Consolidated Financial Statements reflect only the Company's continuing operations except for the entire year. Certain amounts fromConsolidated Statements of Cash Flows, which are presented for the prior year’s financial statements have been reclassifiedwhole company for the three months ended March 31, 2023. For supplemental cash flow disclosures, see Note 4. Divestitures and Discontinued Operationsof the Notes to conformConsolidated Financial Statements in Item 1 of this Form 10-Q.

During the fourth quarter of 2023 there was a change in the capital structure due to a reverse stock split, which decreased the current year’s presentation.number of common shares outstanding. The Company retroactively displayed the effect of the change in the Consolidated Balance Sheets, and retroactively adjusted the computations of basic and diluted EPS for all periods presented on the Consolidated Statement of Operations. For additional information, see Note 11. Capital Structureof the Notes to Consolidated Financial Statements in Item 1 of this Form 10-Q.

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, 2015.2023.
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.

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.


7
9
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)


Impact of New Accounting Pronouncements
In March, 2016, the FASB releasedRecently Issued Accounting Standards Update (“ASU”) 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” 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. The Company elected to early adopt this standard in the second quarter ended June 30, 2016.  

ASU 2016-09 eliminates the requirement to estimate and apply a forfeiture rate to reduce stock compensation expense during the vesting period and, instead, account for forfeitures as they occur. ASU 2016-09 requires that this change beStandards issued not yet adopted using the modified retrospective approach. As such, the Company recorded a cumulative-effect adjustment of $1.0 million to adjust retained earnings.
StandardDescriptionEffect on the financial statements
Update 2024-01 - Compensation—Stock Compensation
(Topic 718) - Scope Application of Profits Interest and Similar Awards		The amendments in this Update related to the scope application issue apply to all reporting entities that account for profits interest awards as compensation to employees or nonemployees in return for goods or services. This Update provides specific examples to help stakeholders to determine whether a profits interest award should be accounted for as a share-based payment arrangement (Topic 718) or similar to a cash bonus or profit-sharing arrangement (Topic 710, Compensation—General, or other Topics).The Company continues to evaluate these changes and does not anticipate any material impact on the Company’s consolidated financial position or results of operations upon adoption.
Planned date of adoption: January 1, 2025
Update 2023-09 - Income Taxes (Topic 740) - Improvements to Income Tax DisclosuresThe amendments in this Update related to the rate reconciliation and income taxes paid disclosures improve the transparency of income tax disclosures by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction.The Company continues to evaluate these changes and does not anticipate any material impact on the Company’s consolidated financial position or results of operations upon adoption.
Planned date of adoption: January 1, 2025
Update 2023-07 - Segment Reporting (Topic 280) - Improvements to Reportable Segment DisclosuresThe amendments in this Update improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The amendments in this Update Requires that a public entity that has a single reportable segment provide all the disclosures required by the amendments in this Update and all existing segment disclosures in Topic 280.The Company continues to evaluate these changes and does not anticipate any material impact on the Company’s consolidated financial position or results of operations upon adoption.
Planned date of adoption: January 1, 2025
Under ASU 2016-09, excess tax benefits related to employee share-based payments are not reclassified from operating activities to financing activities in the statement of cash flows. The Company applied the effect of ASU 2016-09 to the presentation of excess tax benefits in the statement of cash flows, retrospectively. This change increased the net cash provided by operating activities and decreased net cash provided by financing activities by $4.7 million for the nine months ended September 30, 2015.
Under ASU 2016-09, cash paid when withholding shares for tax withholding purposes are classified as a financing activity in the statement of cash flows. ASU 2016-09 requires that this change be adopted retrospectively. The presentation requirements for cash flows related to employee taxes paid for withheld shares increased the net cash provided by operating activities and decreased net cash provided by financing activities by $15.5 million for the nine months ended September 30, 2015.
ASU 2016-09 eliminates additional paid in capital ("APIC") pools and requires excess tax benefits and tax deficiencies to be recorded in the income statement when the awards vest or are settled. This decreased the effective tax rate for the three months ended September 30, 2016 by 2% and increased the effective tax rate by 51% for the nine months ended September 30, 2016. The ASU requires that this change be adopted prospectively. The Company excluded the excess tax benefits from the assumed proceeds available to repurchase shares in the computation of diluted earnings per share for the three months ended September 30, 2016. This increased the diluted weighted average common shares outstanding by 43,762 shares for the three months ended September 30, 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 results as follows:
10
 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


8
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)


Note 3. Revenue

Disaggregation of revenue

The Company adopted ASU 2015-03, “Interest- Imputationdisaggregates revenue from contracts with customers into the nature of Interest (subtopic 835-30); Simplifying the Presentationproducts and services 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 Debt Issuance Costs,the Company’s revenue is from the technology, media, and ASU 2015-15, Presentationtelecom (“TMT”) sector.

Three Months Ended March 31, 2024Three Months Ended March 31, 2023
CloudNetworkX
Messaging2
TotalCloud
NetworkX1
Messaging2
Total
Geography:
Americas$39,579 $— $62 $39,641 $37,414 $394 $513 $38,321 
APAC1,548 — — 1,548 1,647 — — 1,647 
EMEA1,776 — — 1,776 2,017 — — 2,017 
Total$42,903 $— $62 $42,965 $41,078 $394 $513 $41,985 
Service Line:
Professional Services$3,773 $— $— $3,773 $4,661 $— $— $4,661 
Transaction Services— — — — 127 — — 127 
Subscription Services39,130 — 13 39,143 35,886 394 513 36,793 
License— — 49 49 404 — — 404 
Total$42,903 $— $62 $42,965 $41,078 $394 $513 $41,985 
_____________________________
1    Includes revenue recognized in prior periods associated with residual NetworkX contracts not included in the Asset Purchase Agreement with Lumine Group.
2    Includes revenue recognized in the current and Subsequent Measurementprior periods associated with residual Messaging contracts not included in the Asset Purchase Agreement with Lumine Group.

Trade Accounts Receivable and Contract balances

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

A contract asset is a right to long-term debtconsideration that is conditional upon factors other than the passage of time. For example, the Company would record a contract asset if it records revenue on a retrospective basis. The Company's consolidatedprofessional services engagement but are not entitled to bill until the Company achieves specified milestones. Contract asset balance sheets included deferred financing costs of $4.1 millionwas nil and $5.1$1.2 million as of September 30, 2016March 31, 2024 and December 31, 2015, respectively,2023, respectively.

Amounts collected in advance of services being provided are accounted for as contract liabilities, which were reclassified from other assets to long-term debt. The debt issuance costs associatedare presented as deferred revenue on the accompanying balance sheet and are realized with the Company's Credit Facility and Amended Credit Facility continue to be presented in other assets onassociated revenue recognized under the condensed consolidated balance sheets. 

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 hadcontract. Nearly 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 debtCompany's contract liabilities balance 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.services revenue, primarily subscription services contracts.

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.
11
 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



9
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)


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 at December 31, 2023$1,095 
Revenue recognized in the period(42,947)
Amounts billed but not initially recognized as revenue42,508 
Balance at March 31, 2024$656 

1    Comprised of Deferred Revenue. $1.0 million of revenue recognized in the period was included in the contract liability balance at the beginning of the period.

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 March 31, 2024. 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 March 31, 2024, the aggregate amount of transaction price allocated to remaining performance obligations, other than those meeting the exclusion criteria above, was $214.0 million, of which approximately 61.5 percent is expected to be recognized as revenues within 2 years, and the remainder thereafter.

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

Note 4. Divestitures and Discontinued Operations

Discontinued Operations

Messaging and NetworkX Businesses Sale

On October 31, 2023 (the “Closing Date”), Synchronoss Technologies, Inc. and certain of its affiliated entities (such entities, together with the Company, the “Company Group”) entered into an Asset Purchase Agreement (the “Agreement”) with
12
Table of Content
SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
(Amounts in tables in thousands, except for per share data or unless otherwise noted)

Lumine Group Software Solutions (Ireland) Limited, a private limited company incorporated under the laws of Ireland, Lumine Group UK Holdco Ltd, Incognito Software Systems Inc., Lumine Group US Holdco, Inc., Lumine Group Australia Holdco Pty Ltd, Openwave Messaging (Ireland) Limited, Razersight Software Solutions Ireland Limited, Spatial Software Solutions Ireland Limited, Razorsight Software Solutions US Inc., and Openwave Messaging US Inc. (such entities, the “Buyer”), pursuant to which the Company Group sold its Messaging and NetworkX businesses (the “Messaging and NetworkX Businesses”) to Buyer (the “Transaction”) for a total purchase price of up to $41,800,000 (the “Purchase Price”), and Buyer assumed certain liabilities of the Messaging and Digital Businesses. Lumine Group Inc., the parent entity of Lumine Group Software Solutions (Ireland) Limited, guaranteed certain obligations of Buyer under the Agreement pursuant to a separate Limited Guaranty, by and between Lumine Group Inc. and the Company, dated as of the date of the Agreement. The Purchase Price, which is subject to set-off rights in certain circumstances and certain adjustments, is payable as follows: (i) $31,300,000 (as adjusted) was paid in cash to the Company on the Closing Date, (ii) an additional $7,200,000 was deposited by Buyer into an escrow account on the Closing Date (which amount will remain in escrow until reconciliation of a net tangible asset adjustment), with any amounts in such escrow account to be released from escrow to either Buyer or the Company, based on whether such reconciliation indicates a deficit or a surplus in net tangible assets relative to a negotiated target amount, following such reconciliation process, which could take in excess of 150 days following the Closing Date for the initial portion of the net tangible asset reconciliation and 300 days or more following the Closing Date for reconciliation of certain specified assets to be completed, (iii) an additional $300,000 in cash (which amount was not deposited into an escrow account) may become payable to the Company in accordance with the terms of the Agreement in the event that the voluntary disclosure process with respect to certain sales tax matters related to the Messaging and NetworkX Businesses are resolved by the Company within 9 months following the Closing Date, and (iv) an additional amount of up to $3,000,000 in cash (which amount was not deposited into an escrow account) may become payable to the Company as an earn-out based on the achievement of specified gross revenue targets for the Messaging and NetworkX Businesses in fiscal year 2023. Pursuant to the Certificate of Designations of the Series B Perpetual Non-Convertible Preferred Stock, on November 3, 2023 the Company redeemed 9,874 shares of its outstanding Series B Preferred Stock by using $10,000,000 of the Purchase Price, of which $9.9 million was related to principal and $0.1 million was related to accrued dividend.

This transaction represents a strategic shift designed to maximize shareholder value and allow the Company to solely focus on providing cloud-centric solutions. In connection with the sale transaction, the Company determined its Messaging and NetworkX Businesses qualified for discontinued operations accounting treatment in accordance with ASC 205-20. During the fourth quarter of 2023 the Company allocated $28.6 million goodwill to the transaction using level 3 estimates, and recognized a loss on divestiture of $16.4 million reported in Loss on divestiture in the Consolidated Statements of Operations. The Company received $31.3 million in cash proceeds from the sale of Messaging and NetworkX, which was offset by $0.4 million of assumed transaction expenses and $7.2 million of operating cash on the divested entities. Total consideration for the sale also included $1.5 million of estimated deferred consideration, in addition to the cash received in the fourth quarter of 2023.

13
Table of Content
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 tables set forth details of net income from discontinued operations for the three months ended March 31, 2024 and 2023, related to Messaging and NetworkX Businesses sale.
Three Months Ended March 31,
20242023
Net revenues$— $15,723 
Costs and expenses:
Cost of revenues*— 9,421 
Research and development— 1,991 
Selling, general and administrative— 2,343 
Restructuring charges— 3 
Depreciation and amortization— 3,588 
Total costs and expenses— 17,346 
Loss from operations— (1,623)
Interest income— 1 
Other expense, net— 44 
Loss from operations, before taxes— (1,578)
Provision for income taxes— (764)
Net loss$— $(2,342)
_____________________________
1    Cost of revenues excludes depreciation and amortization which are shown separately.

There were no assets and liabilities related to discontinued operations as of March 31, 2024 and December 31, 2023, as all balances were transferred to Lumine Group upon sale.

The following table summarizes the significant non-cash items and capital expenditures of the discontinued operations that are included in the consolidated statements of cash flows for the three months ended March 31, 2024 and 2023:
Three Months Ended March 31,
20242023
Operating activities:
Depreciation and amortization$— $3,588 
Stock-based compensation— 280 
Investing activities:
Additions to capitalized software$— $(1,305)

Divestitures

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 $14 million. The purchase price is payable as follows: (i) $7.5 million on the closing date of the Transaction, (ii) $0.5 million deposited into an escrow account on the Closing Date, (iii) $1 million paid twelve (12) months from the Closing Date, and (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. The Company received the $0.5 million payment in escrow during the third quarter of 2022 in accordance with the terms of the Asset Purchase Agreement. The remaining $1 million escrow payment has not been received by the Company in accordance with the agreement. As of December 31, 2023 the Company fully reserved for the asset and related receivables
14
Table of Content
SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
(Amounts in tables in thousands, except for per share data or unless otherwise noted)

recorded within the Selling, general and administrative expenses line item on the Consolidated Statements of Income, and is pursuing collection of the payment.

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 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 transaction resulted in a $2.5 million gain for the year ended December 31, 2022.

Note 5. Accounts Receivable Securitization Facility

On June 23, 2022 (the “Closing Date”), the Company and certain of its subsidiaries (together with the Company, the “Company Group”) entered into a $15 million accounts receivable securitization facility (the “A/R Facility”) with Norddeutsche Landesbank Girozentrale.

The A/R Facility transaction includes (i) Receivables Purchase Agreements (the “Receivables Purchase Agreements”) dated as of the Closing Date, among the Company, as 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 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’s 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 has not agreed to guarantee any obligations of SN Technologies or the collection of any of the receivables and will not be responsible for any obligations to the extent 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 pay 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 entirety 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 Securities and Exchange Commission on June 23, 2022.

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

The Company drew $3.0 million on the A/R Facility on February 23, 2024, and had repaid the balance in full on March 28, 2024. The interest associated with the draw and repayment was not material for the period. The drawdown and subsequent repayment of the A/R Facility represent financing activities, as reported in the Statement of Cash Flows. As of March 31, 2024 approximately $4.7 million of the Company’s receivables are held by SN Technologies. As of March 31, 2024 there were no outstanding borrowings against the A/R facility and $3.8 million was available for the Company to draw under the A/R Facility.

Note 6. Fair Value Measurements of Assets and Liabilities

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

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

The following isCompany had $19.1 million and $24.6 million of cash and cash equivalents as of March 31, 2024 and December 31, 2023, respectively. The company had nil and $12.5 million in money market accounts, measured as Level 1 inputs as of March 31, 2024 and December 31, 2023, respectively.

Note 7. Note Receivable

Sequential Technology International, LLC

During the second quarter of 2020, the Company entered into an agreement with Sequential Technology International, LLC (“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 summary$9.0 million secured promissory note (the “Note”). As of December 31, 2022, the carrying value of the Note after the consideration of the allowance for credit loss was approximately $4.8 million. The Company determined the allowance on the Note using a discounted cash flow analysis, which discounts the expected future cash flows of the asset to determine the collectible amount.

During the third quarter of 2023, the interest payment for the Note was not received by the Company from STIN. In the third quarter of 2023 the Company reassessed the collectability of the Note and determined that a full allowance for credit losses was required equal to the carrying value of the Note, recorded within the Selling, general and administrative expenses line item on the Consolidated Statements of Operations.

During the first quarter of 2024, the Company entered into an agreement with STINand APC to amend the aforementioned promissory note and reduce the principal balance to $3.0 million, forgive outstanding accrued interest and extend the maturity date of the Note to September 2027. Certain circumstances may enable the Company to receive consideration in excess of the amended principal balance. In the first quarter of 2024 the Company reassessed the collectability of the note and determined a full allowance for credit losses was required equal to the carrying value of the note. Accordingly, the modification of the terms of the Note had no net impact on the condensed consolidated financial statements for the quarter ended March 31, 2024.

Note 8. Leases

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

16
 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, 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.

10
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)


The Company utilizesis party to certain sublease arrangements, primarily related to the market approach to measure fair value for its financial assets. The market approach uses pricesCompany’s real estate leases, where it acts as the lessee 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 quotesintermediate lessor.

Assets under operating leases are included in Operating lease right-of-use assets, with the related short term liabilities included in Accrued expenses and long term portion included in Leases, non-current on the Consolidated Balance Sheets.

Assets under finance leases are included in Property, plant and equipment, net, with the related short term liabilities included in Accrued Expenses and long term portion in Leases, non-current on the Consolidated Balance Sheets.

Operating lease costs are recognized on a non-active market for valuation of these securities. No transfers ofstraight-line basis over the lease terms. Finance lease assets between Level 1, Level 2 and Level 3are amortized on a straight-line basis over the shorter 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 prospectsuseful lives of the issuers,assets or 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.lease terms.


11
17
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)


The unrealized lossesfollowing table presents information about the Company's Right of Use (ROU) assets and fair values of available-for-sale securities that have beenlease liabilities:
March 31, 2024December 31, 2023
Operating lease assets:
Non-current operating lease ROU assets$13,867 $14,791 
Finance lease assets:
Equipment, net1,034 1,094 
Operating lease liabilities:
Lease liabilities, current1
5,939 5,838 
Lease liabilities, non-current21,448 23,037 
Total operating lease liabilities$27,387 $28,875 
Finance lease liabilities:
Lease liabilities, current557 562 
Lease liabilities, non-current505 556 
Total finance lease liabilities$1,062 $1,118 

1    Amounts are included in an unrealized loss position for a period of less than and greater than 12 months as of September 30, 2016, are as follows: Accrued Expenses on the Condensed Consolidated Balance Sheet.
 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 lossesfollowing table presents information about lease expense and fair valuessublease income:
Three Months Ended March 31,
20242023
Finance leases:
Interest expense$28 $16 
Depreciation expense$167 $114 
Total finance leases$195 $130 
Operating leases:
Operating lease cost1
$1,424 $1,533 
Other lease costs and income:
Variable lease costs1
141 295 
Operating lease impairments, net1
— (3)
Sublease income1
(1,019)(716)
Total operating leases546 1,109 
Total net lease cost$741 $1,239 

1    Amounts are included in Cost of available-for-sale securities that have been in an unrealized loss position for a period of less thanrevenues, Selling, general 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 rateadministrative and/or Research and development based on assessments of expected growth in revenue, adjusted by an appropriate factor. The fair value measurement is based on significant inputs not observablethe function that the underlying leased asset supports which are reflected in the market and thus represents a Level 3 measurement. The significant unobservable inputs used in the fair value measurementCondensed Consolidated Statements 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. Operations.



12
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)


The changesfollowing table provides the undiscounted amount of future cash flows included in fair valueour lease liabilities at March 31, 2024 for each of the Company’s Level 3 contingent consideration obligation during the nine months ended September 30, 2016 werefive years subsequent to December 31, 2023 and thereafter, as follows: well as a reconciliation of such undiscounted cash flows to our lease liabilities at March 31, 2024:
Operating LeasesFinance Leases
2024$5,904 $471 
20257,876 478 
20267,859 211 
20276,213 — 
20284,275 — 
Total future lease payments32,127 1,160 
Less: amount representing interest(4,740)(98)
Present value of future lease payments (lease liability)$27,387 $1,062 
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 accountsfollowing table provides the weighted-average remaining lease term and weighted-average discount rates for the redeemable noncontrolling interest at its fair value as temporary equity, due to the redemption option existing outside the control 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.our leases:
March 31, 2024December 31, 2023
Weighted-average remaining lease term (years), weighted based on lease liability balances:
Finance leases2.082.19
Operating leases4.174.40
Weighted-average discount rate (percentages), weighted based on the remaining balance of lease payments:
Finance leases9.6%9.3%
Operating leases8.0%8.0%

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 interest was estimated by applying an income approach using a discountedfollowing table provides certain 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 usedsupplemental noncash information related to value the redeemable noncontrolling interest could significantly increase or decrease the fair value estimates recorded in the condensed consolidated balance sheets.our lease liabilities:
Three Months Ended March 31,
20242023
Cash paid for amounts included in the measurement of lease liabilities:
Finance leases$186 $134 
Operating leases1,961 1,997 
Lease liabilities arising from obtaining right-of-use assets:
Finance leases$105 $294 
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:
19
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.

13
SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
(Amounts in tables in thousands, except for per share data or unless otherwise noted)


Note 9. 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 determinedmay, at its option, at any time and from time to time, redeem the preliminary fair valueSenior 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 Company has not redeemed any of the net assets acquiredSenior Notes as follows:of March 31, 2024.

 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 connectionIndenture 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 this acquisition was based on operating synergiesaccrued and other benefits expectedunpaid interest, if any, to result frombe immediately due and payable. In the combined operationscase of an event of default involving the Company’s bankruptcy, insolvency or reorganization, the principal of, and the assembled workforce acquired. The goodwill acquired is not deductible for tax purposes.
Acquisition-related costs recognized during the nine months ended September 30, 2016accrued and 2015 including transaction costs such 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 expensesunpaid interest on, the condensed consolidated statementsprincipal amount of income.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.


6. Stockholders’ Equity
Stock-Based Compensation

The following table summarizes information about stock-based compensation:
 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 costOn 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 unvested equity awards aswhich the Company may offer and sell, from time to time, up to $18.0 million of September 30, 2016 was approximately $73.4 million. The expense is expectedthe 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 recognized over a weighted-average period“at the market offerings” as defined in Rule 415 under the Securities Act of approximately 2.65 years. 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.



14
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)


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:
March 31, 2024December 31, 2023
8.375% Senior Notes due 2026$141,077 $141,077 
Unamortized discount and debt issuance cost1
(4,428)(4,862)
Carrying value of Senior Notes$136,649 $136,215 

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

Fair value of Debt

The fair value of the 2021 Non-Convertible Senior Notes due 2026 was determined based on the closing trading price of the Senior Notes as of March 31, 2024 and is categorized accordingly as Level 2 in the fair value hierarchy. The Company is in compliance with its debt covenants as of March 31, 2024.
Fair Value
Carrying Amount(Level 1)(Level 2)(Level 3)Total
Balance at December 31, 2023$136,215 $— $107,557 $— $107,557 
Balance at March 31, 2024$136,649 $— $119,916 $— $119,916 

Interest expense

The following table summarizes the Company’s interest expense:
Three Months Ended March 31,
20242023
2021 Non-Convertible Senior Notes due 2026:
Amortization of debt issuance costs$408 $370 
Interest on borrowings2,954 2,954 
Amortization of debt discount26 23 
Other1
129 107 
Total$3,517 $3,454 

1    Includes interest on uncertain tax provisions.

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)

Note 10. Accumulated Other Comprehensive (Loss) / Income

The changes in accumulated other comprehensive (loss) income during the three months ended March 31, 2024 were as follows:
Balance at December 31, 2023Other comprehensive lossTax effectBalance at March 31, 2024
Foreign currency$(22,212)$(6,109)$— $(28,321)
Unrealized loss on intercompany foreign currency transactions(3,520)— — (3,520)
Total$(25,732)$(6,109)$— $(31,841)

Note 11. Capital Structure

Reverse Stock Split

On December 4, 2023, the Company’s stockholders approved proposals at a special meeting of stockholders (the “Special Meeting”) amending the Company’s Restated Certificate of Incorporation (as amended, the “Certificate of Incorporation”), to effect a reverse stock split of the Company’s common stock, $0.0001 par value (“Common Stock”), at a ratio in the range of 1-for-5 to 1-to-20, and an associated reduction in the number of shares of Common Stock the Company is authorized to issue. On December 4, 2023, the Company’s Board of Directors (the “Board”) approved a final split ratio of 1-for-9 (the “Reverse Stock Split”) where each nine (9) shares of Common Stock issued and outstanding immediately prior to the Effective Time shall, automatically and without any action on the part of the respective holders thereof, be combined and converted into one (1) share of Common Stock.

Following such approvals, the Company filed an amendment to the Certificate of Incorporation (the “Certificate of Amendment”) to effect the Reverse Stock Split with the Secretary of State of the State of Delaware on December 8, 2023 as of 4:01 p.m. Eastern Time. The Certificate of Amendment states that the Company is authorized to issue two classes of stock to be designated common stock (“Common Stock”) and preferred stock (“Preferred Stock”). The number of shares of Common Stock authorized to be issued is sixteen million six hundred sixty-six thousand six hundred sixty-seven (16,666,667), par value $0.0001 per share, and the number of shares of Preferred Stock authorized to be issued is ten million (10,000,000), par value $0.0001 per share.

As of the opening of trading on December 11, 2023, the Company’s Common Stock began trading on a post-split basis under CUSIP number 87157B400. The Company’s Common Stock will continue to trade on the Nasdaq Capital Market under the symbol “SNCR.”

The Reverse Stock Split was effected simultaneously for all shares of Common Stock issued and outstanding, and affected all holders of the Company’s Common Stock uniformly and does not affect any stockholder’s percentage ownership interests in the Company, except with respect to the treatment of fractional shares. The Company did not issue fractional shares for post-Reverse Stock Split shares in connection with the Reverse Stock Split. Stockholders who otherwise were entitled to receive a fractional share of Common Stock had such fractional share rounded up to the nearest whole share. The Company retroactively displayed the effect of the Reverse Stock Split change in the Consolidated Balance Sheets, and retroactively adjusted the computations of basic and diluted EPS for all periods presented on the Consolidated Statement of Operations.

As of March 31, 2024, the Company’s authorized capital stock was 26,666,667 shares of stock with a par value of $0.0001, of which 16,666,667 shares were designated as common stock and 10,000,000 shares were designated as preferred stock, 150,000 of which were designated Series B Perpetual Non-Convertible Preferred Stock.

Common Stock

Each holder of common stock is entitled to vote on all matters and is entitled to one 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.

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)

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 are 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 March 31, 2024, the Liquidation Value and Redemption Value of the Series B Preferred Shares was $63.0 million.

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 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.

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)

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 March 31, 2024 and changes during the three months ended March 31, 2024, are presented below:
Series B Preferred Stock
SharesAmount
Balance at December 31, 202361 $58,802 
Balance at March 31, 20241
61 $58,802 

1    Series B preferred stock net principal balance of $58.8 million is presented as gross principal balance of $60.8 million net of $2.0 million unamortized issuance costs.

The Company paid Series B Perpetual Non-Convertible Preferred Stock dividend of $2.1 million in cash for the three months ended March 31, 2024. On April 1, 2024 the Company paid the accrued Series B Perpetual Non-Convertible Preferred Stock dividend of $2.1 million in cash.

Note 12. Stock Plans

On December 8, 2023 the Company filed an amendment to the Certificate of Amendment to effect the Reverse Stock Split with the Secretary of State of the State of Delaware. The Certificate of Amendment states that the Company is authorized to issue 16,666,667 shares of Common Stock, par value $0.0001 per share, and 10,000,000 shares of Preferred Stock, par value $0.0001 per share, 150,000 of which were designated Series B Perpetual Non-Convertible Preferred Stock.

As of March 31, 2024, the Company maintains two stock-based compensation plans, the 2015 Equity Incentive Plan (the “2015 Plan”) and the 2017 New Hire Equity Incentive Plan (“2017 Plan”). The maximum number of shares of common stock authorized for issuance under the 2015 Plan is 4,688,576 shares as of March 31, 2024. The maximum number of shares of common stock authorized for issuance under the 2017 Plan is 229,635 shares as of March 31, 2024.

As of March 31, 2024, there were 0.8 million shares available for the grant or award under the Company’s 2015 Plan and 0.1 million shares available for the grant or award under the Company’s 2017 Plan.

The Company’s performance based cash unit (“PBCU”) awards granted to employees 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 on the Condensed Consolidated Balance Sheet. As of March 31, 2024, 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 March 31,
20242023
Cost of revenues$23 $79 
Research and development223 471 
Selling, general and administrative864 909 
Total stock-based compensation expense$1,110 $1,459 

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 March 31,
20242023
Stock options$198 $422 
Restricted stock awards428 679 
Performance based cash units484 358 
Total stock-based compensation before taxes$1,110 $1,459 
Tax benefit$252 $312 

The total stock-based compensation cost related to unvested equity awards as of March 31, 2024 was approximately $2.6 million. The expense is expected to be recognized over a weighted-average period of approximately 1.5 years.

The total stock-based compensation cost related to unvested performance based cash units as of March 31, 2024 was approximately $1.5 million. The expense is expected to be recognized over a weighted-average period of approximately 1.2 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 September 30, Nine Months Ended September 30,
2016 2015 2016 2015
Three Months Ended March 31,
Three Months Ended March 31,
Three Months Ended March 31,
2024
2024
2024
Expected stock price volatility
Expected stock price volatility
Expected stock price volatility46% 46% 45% 48%
Risk-free interest rate1.27% 1.27% 1.16% 1.26%
Risk-free interest rate
Risk-free interest rate
Expected life of options (in years)
Expected life of options (in years)
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
Expected dividend yield
Expected dividend yield
Weighted-average fair value of the options
Weighted-average fair value of the options
Weighted-average fair value of the options
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 March 31, 2024:
Employee
Number of
Options		Weighted-Average
Exercise Price		Weighted-Average
Remaining
Contractual
Term (Years)		Aggregate
Intrinsic
Value
Outstanding at December 31, 2023649 $30.44 
Options Granted1 6.26 
Options Exercised— — 
Options Cancelled(148)36.62 
Outstanding at March 31, 2024502 $29.37 4.10$14 
Vested and exercisable at March 31, 2024319 $38.63 3.51$— 

The total intrinsic value of stock options exercisable was nil as of March 31, 2024 and 2023, respectively. The total intrinsic value of stock options exercised was nil and nil during the three months ended March 31, 2024 and 2023, respectively.

Awards of Restricted Stock Purchase Planand Performance Stock

On February A summary of the Company’s unvested restricted stock at March 31, 2024, and changes during the three months ended March 31, 2024, is presented below:
Number of
Awards		Weighted- Average
Grant Date
Fair Value
Unvested at December 31, 2023491 $10.88 
Granted2 6.26 
Granted adjustment1
38 12.24 
Vested(53)9.94 
Forfeited(39)10.85 
Unvested at March 31, 2024439 $10.56 
___________________________
1    2012,Represents performance based cash units grants that vested and were paid out in form of shares of stock during the Company establishedperiod and changes in unvested performance based restricted stock awards due to performance adjustments.

Restricted stock awards are granted subject to service conditions or service and performance conditions. Restricted stock awards (“RSA”) and performance based restricted stock awards (“PRSA”) are measured at the closing stock price at the date of grant and the expense is 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. GoodwillA summary of the Company’s outstanding performance based cash units at March 31, 2024 and Intangibleschanges during the three months ended March 31, 2024, is presented below:
Number of
Units		Period End Fair Value
Outstanding at December 31, 2023507 $6.21 
Granted— — 
Granted adjustment1
(162)— 
Vested and distributed2
(38)— 
Forfeited(30)— 
Outstanding at March 31, 2024277 $8.35 
Goodwill___________________________
1    Includes changes in the outstanding PBCU due to performance adjustments.
2    Includes earned PBCU that vested and were distributed to participants during the period.

Performance based cash units are measured at the closing stock price at the reporting period end date and the expense is recognized straight line over the requisite service period. The expense for the period will increase or decrease based on updated fair values of these units 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.

Note 13. Restructuring

The Company records goodwill which representscontinues to identify workforce optimization opportunities to better align the excessCompany’s resources with its key strategic priorities.

A summary of the purchase price overCompany’s restructuring accrual at March 31, 2024 and changes during 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.three months ended March 31, 2024, are presented below:
Employee Termination Costs
Balance at December 31, 2023$2,388 
Charges219 
Payments(1,024)
Other adjustments(5)
Balance at March 31, 2024$1,578 

Note 14. Income Taxes

The changes in goodwillCompany recognized an income tax expense of approximately $0.6 million and $0.3 million during the ninethree 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
March 31, 2024 and 2023, respectively. The reclassification adjustmenteffective tax rate was approximately 11.9% for the three months ended March 31, 2024, which was lower than the U.S. federal statutory rate primarily due to the impact of $3.0 million is primarily related to a changevaluation allowances recorded and foreign tax rate differential, partially offset by projected current income tax expense in the U.S. and certain foreign jurisdictions. The Company’s deferredprojection of current income 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 is driven by the impact of Global Intangible Low-Taxed Income and enacted Internal Revenue Code Section 174 rules that require the Company to capitalize and amortize qualifying research and development expenses and by operating income generated in certain foreign jurisdictions. The Company’s effective tax rate was approximately (3.6)% for the three months ended September 30, 2016March 31, 2023, which was lower than the U.S. federal statutory rate due to pre-tax losses in jurisdictions where full valuation allowances have been recorded, foreign tax rate differential and the year ended December 31, 2015 was $35.0 millioncertain jurisdictions projecting current income tax expense. The Company continues to consider all available evidence, including historical profitability and $28.6 million, respectively.
The Company’s intangible assets consistprojections of the following: future taxable income together with new evidence, both
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)


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 three months ended March 31, 2024.
Estimated
Unrecognized tax benefits associated with uncertain tax positions are $4.4 million at March 31, 2024. We are not able to reasonably estimate when we would make any cash payments required to settle these liabilities, but we do not believe that the ultimate settlement of our obligations will materially affect our liquidity. We do not expect that the balance of unrecognized tax benefits will significantly increase or decrease over the next twelve months.

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 while the receipt of the 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.

The Pillar Two Global Anti-Base Erosion rules issued by the Organization for Economic Co-operation and Development ("OECD"), a global policy forum, introduced a global minimum tax of 15% which would apply to multinational groups with consolidated financial statement revenue in excess of EUR 750 million. Nearly all OECD member jurisdictions have agreed in principle to adopt these provisions and numerous jurisdictions, including jurisdictions where the Company operates, have enacted these rules effective January 1, 2024. The Company is not currently subject to these rules but is continuing to evaluate the Pillar Two Framework and its potential impact on future amortizationperiods.

On January 31, 2024, the House of Representatives passed a proposed tax bill which, among other provisions, aims to reinstate 100% bonus depreciation for property placed in service in 2023 and through 2025 and to allow taxpayers to expense domestic research costs retroactively back to 2022 and prospectively through tax years beginning before 2026. Enactment remains highly uncertain and the Company continues to monitor the ongoing developments in the proposed legislation.

Note 15. Earnings per Common Share (“EPS”)

Basic EPS is computed based upon the weighted average number of its intangible assetscommon shares outstanding for the next five yearsyear. Diluted EPS is as follows: 
Year ending December 31, 
2016$12,079
201749,338
201846,218
201938,984
202025,302
202113,161
9. Debt
Credit Facility
In September 2013,computed based upon the Company entered into a Credit Agreement (the “Credit Facility”) with JP Morgan Chase Bank, N.A., asweighted average number of common shares outstanding for the administrative agent, Wells Fargo Bank, National Association, asyear plus the syndication agentdilutive effect of common stock equivalents using the treasury stock method and Capital One, National Association and KeyBank National Association, as co-documentation agents.  The Credit Facility, which was 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 Notesfollowing 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 March 31,
20242023
Numerator - Basic:
Net income (loss) from continuing operations$4,475 $(8,589)
Net (loss) income attributable to redeemable noncontrolling interests(5)14 
Preferred stock dividend(2,129)(2,474)
Net income (loss) attributable to Synchronoss from continuing operations2,341 (11,049)
Net loss from discontinued operations— (2,342)
Net income (loss) attributable to Synchronoss$2,341 $(13,391)
Numerator - Diluted:
Net income (loss) attributable to Synchronoss from continuing operations2,341 (11,049)
Net loss from discontinued operations— (2,342)
Net income (loss) attributable to Synchronoss$2,341 $(13,391)
Denominator:
Weighted average common shares outstanding — basic9,842 9,653 
Dilutive effect of:
Shares from assumed conversion of PBCU277 — 
Options and unvested restricted shares158 — 
Weighted average common shares outstanding — diluted$10,277 $9,653 
Earnings (loss) per share:
Basic EPS:
Net income (loss) from continuing operations$0.24 $(1.14)
Net loss from discontinued operations— (0.25)
Basic EPS$0.24 $(1.39)
Diluted EPS:
Net income (loss) from continuing operations$0.23 $(1.14)
Net loss from discontinued operations— (0.25)
Diluted EPS$0.23 $(1.39)

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)

Note 16. Commitments

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 2027.

Aggregate annual future minimum payments under non-cancelable agreements as of March 31, 2024 for each year subsequent to December 31, 2023 and thereafter, are senior, unsecured obligationsas follows:
Non-cancelable agreements
2024$16,391 
202512,674 
2026901 
202728 
Thereafter— 
Total$29,994 

Note 17. 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 (the “DoJ”) initiated investigations 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. On June 7, 2022 the SEC approved the Offer of Settlement and filed an Order Instituting Cease-And-Desist Proceedings pursuant to Section 21C of the Securities Exchange Act of 1934, Making Findings, and Imposing a Cease-And-Desist Order (the “SEC Order”). Pursuant to the terms of the SEC 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. In addition, failure to comply with the provisions of the SEC Order could result in further actions by one or both governmental agencies which could have a material adverse effect on the Company’s results of operations. The penalties have been paid in full as of March 31, 2024. 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 as set forth above. The Company may be required to indemnify the former members of management in that action for certain costs and expenses, including reasonable attorney’s fees. At this time it is not possible for us to estimate the amount, if any, of such indemnification obligations.

On or about July 12, 2023, the Company filed a complaint in the Superior Court of the State of Delaware against iQmetrix Global Ltd. (“iQmetrix") for breach of the asset purchase and transition services agreements by and between the Company and are convertible into shares of its common stock based on a conversion rate of 18.8072 shares per $1,000 principal amount of 2019 Notes which is equivalent to an initial conversion price of approximately $53.17 per share. The Company will satisfy any conversion of the 2019 Notes with shares of the Company’s common stock. The 2019 Notes are convertible at the note holders’ option prior to their maturity and if specified corporate transactions occur. The issue price of the 2019 Notes was equal to their face amount.
Holders of the 2019 Notes who convert their notes in connection with a qualifying fundamental change, as defined in the related indenture, may be entitled to a make-whole premium in the form of an increase in the conversion rate. Additionally, following the occurrence of a fundamental change, holders may require that the Company repurchase some or all of the 2019 Notes for cash at a repurchase price equal to 100% of the principal amount of the notes being repurchased, plus accrued and unpaid interest, if any. As of September 30, 2016, none of these conditions existed with respect to the 2019 Notes andiQmetrix as a result the 2019 Notes are classified as long term.
The 2019 Notes are the Company’s direct senior unsecured obligationsof iQmetrix’s failure to pay amounts due under those agreements in excess of $1,200,000. On September 11, 2023, iQmetrix filed its “Answer Defenses 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,Counterclaims” against the Company, initiatedclaiming the preliminary phaseCompany breached the
30
SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
(Amounts in tables in thousands, except for per share data or unless otherwise noted)

asset purchase, transition services and software license agreements, committed fraud and breached the implied covenant of a corporate restructuring, with reductions occurring across all levelsgood faith and departments within the Company. This measure was intendedfair dealing entitling iQmetrix to reduce costs andan amount to align the Company’s resources with its key strategic priorities. As of September 30, 2016, there were $0.4 million of accrued restructuring charges on the balance sheet.
A summary of the Company’s restructuring accrualbe determined at September 30, 2016 and changes during the nine months ended September 30, 2016, is presented below: 
 Balance at December 31, 2015 Charges Payments Balance at September 30, 2016
Employment termination costs$—
 $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
trial. On October 7, 2014,10, 2023, the Company filed an amended complaint inits “Answer to Defendant’s Counterclaims” denying all counts asserted by iQmetrix and asserting certain affirmative defenses thereto. The Company believes that the United States District Court for the District of New Jersey (Civ Act. No. 3:14-cv-06220) against F-Secure Corporationcounterclaims are without merit, 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 licenseintends 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.defend all such counterclaims.

The Company’s 2011 acquisition agreement with Miyowa SA provided that former shareholders of Miyowa SA would be eligible for earn-out payments,Due to the extent specified business milestones were achieved following the acquisition. In December 2013, Eurowebfund and Bakamar, two former shareholdersinherent uncertainty of Miyowa SA, filed a complaint against the Company in the Commercial Court of Paris, France claiming that they are entitled to certain earn-out payments under the acquisition agreement. The Company was served with a copy of this complaint in January 2014. On December 3, 2015, the Court dismissed all claims in the complaint against the Company. On December 19, 2015, the former shareholders of Miyowa filed an appeal with the Court of Appeal of Paris, France, appealing the Court’s decision. Althoughlitigation, the Company cannot predict the outcome of the appeal,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.

Note 18. Additional Financial Information

Other Income (expense), net

The following table sets forth the components of Other Income (expense), net included in the Condensed Consolidated Statements of Operations:
Three Months Ended March 31,
20242023
Foreign exchange gains (losses)$3,801 $(2,953)
Other1
10 (22)
Total$3,811 $(2,975)
________________________________
1    Represents an aggregate of individually immaterial transactions.

Note 19. Subsequent Events

The Company is currentlydrew $3.0 million on the plaintiff in several patent infringement cases. The defendants in several of these cases have filed counterclaims. AlthoughA/R Facility on April 10, 2024, and had not repaid the Company cannot predict the outcomebalance as of the cases atdate of filing this time due to the inherent uncertaintiesForm 10-Q.
31
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 geopolitical tensions and its impact on our business and financial performance. Actual results may differ materially from the forward-looking statements we make. We caution investors not to place substantial reliance on the forward-looking statements included in this quarterly report. These statements speak only as of the date of this quarterly report, (unless another date is indicated), and we undertake no obligation to update or revise the statements in light of future developments. All numbers are expressed in thousands unless otherwise stated.

Overview

We areSynchronoss Technologies, Inc. (“Synchronoss” or the “Company”) is a leading innovatorprovider of white label cloud solutions, software-based activation, secure mobility, identitysoftware and services that enable our customers to keep subscribers, systems, networks and content in sync.

The Synchronoss Personal CloudTM solution is designed to create an engaging and trusted customer experience through ongoing content management and engagement. The Synchronoss Personal CloudTM platform is a 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, storage and content management capabilities, broadband connectivity solutions, analytics,highly scalable, white label messaging, identity/access managementplatform that allows our customers’ subscribers to backup and secure mobility management that enable communications service providers (CSPs), cable operators/multi-services operators (MSOs)protect, engage with, and original equipment manufacturers (OEMs) with embedded connectivity (e.g. smartphones, laptops, tablets and MIDs, such as automobiles, wearables formanage their personal health and wellness, and connected homes), multi-channel retailers, medium and large enterprises and their consumers as well as other customers to accelerate and monetize value-added services for secure and broadband networks and connected devices.
Our Activation Software, Synchronoss Personal Cloud™ and 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.gives our operator customers the ability to increase average revenue per user (“ARPU”) and reduce churn.
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 deviceCloudTM platform is specifically designed to a new device,support smartphones, tablets, desktops computers, and syncs, backs uplaptops.

Synchronoss’ Messaging platform (Owned 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,operated through October 31, 2023) had powered 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 platforms 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.

mailboxes for hundreds of millions of telecommunication subscribers. Our SynchronossAdvanced Messaging isplatform had been a powerful, secure, intelligent, white label messaging platform that expanded capabilities for communications service provider and multi-service providers and offersto offer P2P messaging via Rich Communications Services (“RCS”). Our Mobile Messaging Platform (“MMP”) provided a full range of deployment options including full integration with on premise systems, hybrid deployment supportsingle standard ecosystem 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 provisioningonboarding and management integrationto brands, advertisers and message wholesalers.

The Synchronoss NetworkX (Owned and operated through October 31, 2023) products had provided operators with Nagios for monitoringthe tools and alerts) with support for smartphones, tabletssoftware to design their physical network, streamlined their infrastructure purchases, and connected devices (supportmanaged and optimized comprehensive network expenses 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.

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 enable new revenue streams and retention opportunities for our 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. We currently operate in and market our solutions and services directly through our sales organizations in North America,the Americas, Europe, Middle East and Asia-Pacific.Africa (“EMEA”) and Asia-Pacific (“APAC”).

Revenues

We generate a substantial portionmost of our revenues on a per-transaction or subscription basis, which is derived from contracts that extend up to 6048 months from execution. For the three months ended September 30, 2016 and 2015, we derived approximately 66% and 73%, respectively,

32
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 markets. As such, the volume of transactions that we process could fluctuatesubscribers and 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 becomeare subject to currency translation risk that could affect our future net sales as reported in U.S. dollars.

EachThe Company’s top five customers accounted for 97.2% and 95.6% of net revenues for the three months ended March 31, 2024 and March 31, 2023, respectively. Contracts with these customers typically run for three to five years. Of these customers, both Verizon and AT&T and Verizon accounted for more than 10% of our revenues for the three months ended September 30, 2016in 2024 and 2015.2023. The loss of Verizon or AT&T and 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 or AT&T 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. 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 with white label, secure and scalable products for mobile devices.

Secure Mobility. As Enterprise looks to increase productivity, it turns to mobile. Yet it finds itself confronted with the serious logistical challenges of not only managing stringent security requirements, but also accommodating the personal devices of its employees as a lower cost and more employee-friendly option. This trend of Bring Your Own Device (BYOD) is now prevalent enough that regulated industries are investigating new ways to merge Wall Street level regulated security and privacy with main stream usability standards of Facebook, Twitter, Slacker and other third party mobile services. Inherent in this challenge is managing multi-factor authentication, policy driven credential management and fraud protection as employees move in and out of “work” selves and “Home” selves – or even in, out or between companies. In addition to being able to manage different personas, the ability to create more productive work flows employing predictive analytics is taking on a higher value as a desirable function of a secure mobility platform. Our Secure Mobility platform enables Enterprise to pivot quickly into the regulated BYOD work environment and realize cost savings as well as productivity gains.
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 up new revenue streams and allow Operators to compete with OTT providers in new ways.
To support our expected growth, which we expect to be driven by the 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 automationWe have focused our product development efforts on expanding the functionality, scalability and security of the transactions generated by our more mature customersproducts and additional transaction types. Our cost of services can fluctuate from periodsolutions. We expect to period based upon the level of automation and the on-boarding of new transaction and service types. We are also making investments in newsustain our research and development ofinvestments as we intend to continue on an aggressive path to develop new products designed to enable us to grow rapidly in the mobile wireless market.features and functionality, upgrade and extend our product offerings and develop new technology. 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 carriers and international mobile carriersconverging TMT market 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.


33
Discussion of the Condensed Consolidated Statements of Operations

Three months ended March 31, 2024 compared to the three months ended March 31, 2023

The following table presents an overview of our results of operations for the three months ended March 31, 2024 and 2023 (in thousands):
Three Months Ended March 31,$ Change
202420232024 vs 2023
Net revenues$42,965 $41,985 $980 
Cost of revenues1
10,223 10,960 (737)
Research and development10,331 12,744 (2,413)
Selling, general and administrative13,257 15,966 (2,709)
Restructuring charges219 342 (123)
Depreciation and amortization4,359 3,932 427 
Total costs and expenses38,389 43,944 (5,555)
Income (loss) from operations$4,576 $(1,959)$6,535 

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

Net revenues increased $1.0 million to $43.0 million for the three months ended March 31, 2024, compared to the same period in 2023. The increase in revenue was primarily due to $3.2 million increase in subscription revenue due to growth in Cloud subscribers, partially offset by ($0.9) million decrease in professional services associated with the prior year launch of SoftBank and ($0.9) million revenue recognized in the prior period from expiring Messaging and Digital contracts not included in the Assets Purchase Agreement with Lumine Group.

Cost of revenues decreased $0.7 million to $10.2 million for the three months ended March 31, 2024, compared to the same period in 2023. The 2024 decrease was primarily attributable to the reduced employee costs due to restructuring.

Research and development expense decreased $2.4 million to $10.3 million for the three months ended March 31, 2024, compared to the same period in 2023. The research and development costs decreased year over year mainly as a result of reduced employee costs due to restructuring and executed cost savings initiatives to streamline our workforce and reduce vendor spend and overhead costs.

Selling, general and administrative expense decreased $2.7 million to $13.3 million for the three months ended March 31, 2024, compared to the same period in 2023. The decrease in selling, general and administrative expense is mainly related to reduced employee costs due to restructuring and non-recurring professional fees.

Restructuring charges were $0.2 million for the three months ended March 31, 2024 and $0.3 million for the three months ended March 31, 2023. Restructuring charges were primarily related to employment termination costs as a result of the work-force reductions initiated to reduce operating costs and align our resources with our key strategic priorities.

Depreciation and amortization expense increased $0.4 million to $4.4 million for the three months ended March 31, 2024, compared to the same period in 2023. The 2024 increase was primarily attributable to the increased amortization of capitalized software.

Income tax. The Company recognized an income tax expense of approximately $0.6 million and $0.3 million during the three months ended March 31, 2024 and 2023, respectively. The effective tax rate was approximately 11.9% for the three months ended March 31, 2024, which was lower than the U.S. federal statutory rate primarily due to the impact of valuation allowances recorded and foreign tax rate differential, partially offset by projected current income tax expense in the U.S. and certain foreign jurisdictions. The Company’s projection of current income tax expense for the period is driven by the impact of Global Intangible Low-Taxed Income and enacted Internal Revenue Code Section 174 rules that require the Company to capitalize and amortize qualifying research and development expenses and by operating income generated in certain foreign
34
jurisdictions. The Company’s effective tax rate was approximately (3.6)% for the three months ended March 31, 2023, which was lower than the U.S. federal statutory rate due to pre-tax losses in jurisdictions where full valuation allowances have been recorded, foreign tax rate differential and certain jurisdictions projecting current income tax expense.

Liquidity and Capital Resources

As of March 31, 2024, our principal sources of liquidity were cash provided by operations. Our cash and cash equivalents balance was $19.1 million at March 31, 2024. We anticipate that our principal uses of cash and cash equivalents will be sufficient to fund our business, including technology expansion and working capital.

At March 31, 2024, our non-U.S. subsidiaries held approximately $13.1 million of cash and cash equivalents that are available for use by our operations around the world.

Our policy has been to leave our cumulative unremitted foreign earnings invested indefinitely outside the United States, and we intend to continue this policy for most of our foreign subsidiaries. During 2023, we changed our indefinite reinvestment assertion for our Indian subsidiary and recorded a deferred tax liability associated with the outside basis difference. The Company continues to assert permanent reinvestment of foreign earnings in all other foreign jurisdictions. Due to the timing and circumstances of repatriation of such earnings, if any, it is not practicable to determine the unrecognized deferred tax liability relating to such amounts.

We believe that our cash, cash equivalents, financing sources, and our ability to manage working capital and expected positive cash flows generated from operations in 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. 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, 2023, some of which are outside of our control.

For further details, see Note 9. Debt and Note 11. 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):
Three Months Ended March 31,
20242023
Net cash provided by (used in):
Operating activities$527 $1,295 
Investing activities(3,803)(5,470)
Financing activities$(2,129)$(2,299)

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 three months ended March 31, 2024 was $0.5 million as compared to $1.3 million of cash provided by operating activities for the same period in 2023. In the current period, the Company generated cash from operations mainly driven by continued growth in cloud subscribers and reduced operating costs, offset by unfavorable movements in working capital compared to the first quarter of 2023.

Cash used in investingactivities for the three months ended March 31, 2024 was $3.8 million as compared to $5.5 million of cash used in investing activities during the same period in 2023. The cash used for investing activities in the current year and
35
prior year was primarily related to continued investment in product development for our Cloud offering and capitalization of associated labor costs.

Cash used in financing activities for the three months ended March 31, 2024 was $2.1 million as compared to $2.3 million of cash used in financing activities during the same period in 2023. The cash used in investing activities in the current year and prior year was primarily related to dividend payments on the Series B Preferred Stock.

Effect of Inflation

Inflationary increases in certain input costs, such as occupancy, labor and benefits, and general administrative costs, have impacted our business. Management does not believe these impacts have had a material impact on our results of operations during the three months ended March 31, 2024 and 2023. We cannot assure you, however, that we will not be affected by general inflation in the future.

Contractual Obligations
Our contractual obligations consist of office and laptop leases, notes payable and related interest as well as contractual commitments under third-party hosting, software licenses and maintenance agreements. The following table summarizes our long‑term contractual obligations as of March 31, 2024 (in thousands):
Payments Due by Period
Total20242025-20272028
Finance lease obligations$1,160 $471 $689 $— 
Interest29,538 8,861 20,677 — 
Operating lease obligations32,127 5,904 21,948 4,275 
Purchase obligations1
29,994 16,391 13,603 — 
Senior Note Payable141,077 — 141,077 — 
Total$233,896 $31,627 $197,994 $4,275 

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

Uncertain Tax Positions

Unrecognized tax benefits associated with uncertain tax positions are $4.4 million at March 31, 2024. We are not able to reasonably estimate when we would make any cash payments required to settle these liabilities, but we do not believe that the ultimate settlement of our obligations will materially affect our liquidity. We do not expect that the balance of unrecognized tax benefits will significantly increase or decrease over the next twelve months.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations are based on ourOur condensed consolidated financial statements whichand 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 condensed consolidated financial statements and the reported amounts of revenues and expenses during a fiscal period. Although we believe that our judgmentsThe 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 appropriate, correctreasonable, including but not limited to the potential impacts from current geopolitical tensions. As the extent and reasonable underduration of the circumstances, actualimpacts from geopolitical developments remain unclear, the Company’s estimates and assumptions may evolve as conditions change. Actual results maycould 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
36
periods could be materially affected. See “RiskPart II, “Item 1A. Risk Factors” in this Form 10-Q 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 forDuring the yearthree months ended DecemberMarch 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
There2024, there were no significant changes in our critical accounting policies and estimates discussed in our Form 10-K duringfor the nine monthsyear ended September 30, 2016.December 31, 2023. 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, 20152023 for a more complete discussion of our critical accounting policies and estimates.

Key Developments
On March 1, 2016, we acquired all outstanding shares of Openwave Messaging, Inc. for $124.5 million, net of working capital adjustments and liabilities assumed, comprised of $102.5 million paid in cash and $22 million paid in shares of our common stock, based upon the average market value of the common stock for the ten trading days prior to the acquisition date.
Openwave’s product portfolio includes its core complete messaging platform optimized for today’s most complex messaging requirements worldwide with a particular geographic strength in Asia Pacific. With this acquisition and combined with our current global footprint, we will have increased direct access to subscribers around the world for the Synchronoss Personal Cloud platform and bolster our go-to-market efforts internationally.

Results of Operations
Three months ended September 30, 2016compared to the three months ended September 30, 2015
The following table presents an overview of our results of operations for the three months ended September 30, 2016 and 2015:
 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 million to $176.4 million for the three months ended September 30, 2016, compared to the same period in 2015. Transaction and subscription revenues as a percentage of sales were 66% or $117.1 million for the three months ended September 30, 2016, compared to 73% or $109.4 million for the same period in 2015. The $7.7 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 $59.3 million for the three months ended September 30, 2016, compared to 27% or $41.5 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 $0.3 million to $74.5 million for the three months ended September 30, 2016, compared to the same period in 2015. Net revenues related to Activation Solutions represented 42% for the three months ended September 30, 2016, compared to 50% for the same period in 2015. Net revenues related to our Cloud Solutions increased by $25.8 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, due 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 2016 to reduce costs and align our resources with our key strategic priorities.
Depreciation and amortization. Depreciation and amortization expense increased $4.9 million to $24.7 million for the three months ended September 30, 2016, compared to the same period in 2015. This was primarily related to the increase in depreciable assets necessary for the continued expansion of our platforms and amortization of our newly acquired intangible assets related to our recent acquisitions. 
Interest income.  Interest income decreased $0.3 million to $0.3 million for the three months ended September 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, which was higher than our 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. and the unfavorable impact of the fair market value adjustment for the contingent consideration obligation related to the Razorsight earn-out. Our effective tax rate was approximately 53% for the three months ended September 30, 2015, which was higher than our U.S. federal statutory rate due to the unfavorable impact of losses in foreign jurisdictions, which have lower tax rates than the U.S. and the unfavorable impact of transaction costs related to the purchase of Razorsight, which are required to be capitalized for income tax purposes.


Nine months ended September 30, 2016 compared to the nine months ended September 30, 2015

The following table presents an overview of our results of operations for the nine months ended September 30, 2016 and 2015:

 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 million to $476.7 million for the nine months ended September 30, 2016, compared to the same period in 2015. Transaction and subscription revenues as a percentage of sales were 69% or $330.9 million for the nine months ended September 30, 2016 compared to 73% or $306.0 million for the same 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, 2016 compared to the same period in 2015. The increase in our Cloud Solution performance was a result of new cloud offerings with new 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 $45.0 million to $217.0 million for the nine months ended September 30, 2016, 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.  Research and development expense increased $9.9 million to $78.4 million for the nine months ended September 30, 2016, compared to the same period in 2015 primarily due to an increase of $11.1 million in outside consultant expense which was mostly driven by the launch of our Enterprise solution offset by a $1.1 million decrease in personnel and related costs due to the capitalization of qualified software costs.

Selling, general and administrative.  Selling, general and administrative expense increased $29.2 million to $89.8 million for the nine months ended September 30, 2016, compared to the same period in 2015. The increase was driven in part by a $13.3 million increase in personnel and related costs 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, related to employment termination costs as a result of the work‑force reduction plan started in March 2016 to reduce costs and align our resources with our key strategic priorities.
Depreciation and amortization. Depreciation and amortization expense increased $22.8 million to $74.0 million for the nine months ended September 30, 2016, compared to the same period in 2015, primarily related to the increase in depreciable assets necessary for the continued expansion of our platforms and amortization of our newly acquired intangible assets related to our recent acquisitions.

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.  We recognized approximately $14.9 million and $25.5 million in related income tax expense during the nine months ended September 30, 2016 and 2015, respectively. Our effective tax rate was approximately 1,143% for the nine months ended September 30, 2016, which was higher than our 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., the unfavorable impact of the fair market value adjustment for the Razorsight contingent consideration obligation and the recording of a non-cash income tax provision to establish a valuation allowance. We considered all available evidence, including our historical profitability and projections of future taxable income together with new evidence, both positive and negative, that could affect the view of the future realization of deferred tax assets. As a result of our assessment, we recorded a $2.9 million valuation allowance which reduced the deferred tax asset related to our current net operating losses of certain foreign subsidiaries. Our effective tax rate was approximately 42% for the nine months ended September 30, 2015, which was higher than our U.S. federal statutory rate due to the unfavorable impact of losses in foreign jurisdictions We review the expected annual effective income tax rate and make changes on a quarterly basis as necessary based on certain factors such as changes in forecasted annual operating income, changes to the actual and forecasted permanent book-to-tax differences, and changes resulting from the impact of tax law changes.

Liquidity and Capital Resources
Our principal source of liquidity has been cash provided by operations and borrowings on our Credit Facility. Our cash, cash equivalents and marketable securities balance was $144.3 million at September 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. We anticipate that our principal uses of cash in the future will be to fund the expansion of our business through both organic growth as well as possible acquisition activities and the expansion of our customer base.  Uses of cash will also include facility and technology expansion, capital expenditures, and working capital.

At September 30, 2016, our non-U.S. subsidiaries held approximately $25.0 million of cash and cash equivalents that are available for use by all of our operations around the world. At this time, we believe the funds held by all non-U.S. subsidiaries, except those acquired as part of the Openwave acquisition, will be permanently reinvested outside of the U.S. However, if these funds were repatriated to the U.S. or used for U.S. operations, certain amounts could be subject to U.S. tax for the incremental amount in excess of the foreign tax paid. Due to the timing and circumstances of repatriation of such 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, cash generated from our existing operations, our available credit facilities and other available sources of financing will be sufficient to fund our operations for the next twelve months based on our current business plans.
Effect of Inflation
Although inflation generally affects us by increasing our cost of labor and equipment, we do not believe that inflation has had any material effect on our results of operations for the nine months ended September 30, 2016 or 2015. 

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 receiptsPresentation 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 asConsolidation of the earliest date practicable. Management is currently evaluating the impactNotes to Condensed Consolidated Financial Statements in Item 1 of ASU 2016-15 on our condensed consolidated financial statements.this Form 10-Q.


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 Measurement of Debt Issuance Costs Associate with Line of Credit Arrangements, during the first quarter of 2016, concurrently. The adoption of these ASUs required us to reclassify the deferred financing costs associated with our Convertible Senior Notes from other assets to long-term debt on a retrospective basis. Our consolidated balance sheets included deferred financing costs of $4.1 million and $5.1 million as of September 30, 2016 and December 31, 2015, respectively, which were reclassified from other assets to long-term debt. The debt issuance costs associated with our Credit Facility and Amended Credit Facility continue to be presented in other assets on the condensed consolidated balance sheets.
Off-Balance Sheet Arrangements

We had no off-balance sheet arrangements as of September 30, 2016March 31, 2024 and December 31, 20152023 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 the other information set forthmarket risks related to changes in this report, you should carefully consider the factors discussedinterest rates. These investments are denominated 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 and cash equivalents at March 31, 2024 and December 31, 2015, which could materially affect our business, financial condition or future results. We believe our exposure associated with these2023 were invested in liquid money market risks has not changed materially since December 31, 2015.accounts and certificates of deposit. 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.

37
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 September 30, 2016March 31, 2024 would increase interest income by less than $0.5approximately $0.2 million on an annual basis.

Borrowings under our credit facility, are at variable rates of interest and expose us to interest rate risk. As such, our net income is sensitive to movements in interest rates. If interest rates increase, our debt obligations on the variable rate indebtedness would increase even though the amount borrowed remained the same, and our net income would decrease. Such increases in interest rates could have a material adverse effect on our cash flow and financial condition. We do not hold any derivative instruments and do not engage in any hedging activities to mitigate interest rate risk.
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 March 31, 2024.

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.
38
PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

On October 7, 2014, we filed an amended complaint in the United States District Court for the District of New Jersey (Civ Act. No. 3:14-cv-06220) against F-Secure Corporation and F-Secure, Inc. (collectively, “F-Secure"), claiming that F-Secure has infringed, and continues to infringe, severalFor a discussion of our patents.  In February 2015, we entered into a patent license and settlement agreement with F-Secure Corporation and F-Secure, Inc. whereby we granted each of these companies (but not their subsidiaries or affiliates) a limited license to our patents. As a result of entering into the patent license and settlement agreement, the parties filed a joint stipulation to dismiss the above complaint.
Our 2011 acquisition agreement with Miyowa SA provided that former shareholders of Miyowa SA would be eligible for earn-out payments to the extent specified business milestones were achieved following the acquisition. In December 2013, Eurowebfund and Bakamar, two former shareholders of Miyowa SA filed a complaint against us in the Commercial Court of Paris, France claiming that they are entitled to certain earn-out payments under the acquisition agreement. We were served with a copy of this complaint in January 2014. On December 3, 2015, the Court dismissed all claims in the complaint against us. On December 19, 2015, the former shareholders of Miyowa filed an appeal with the Court of Appeal of Paris, France, appealing the Court’s decision. Although we cannot predict the outcome of the appeal, or estimate any potential loss if the outcome is adverse, due to the inherent uncertainties of litigation, we believe the positions of Eurowebfund and Bakamar are without merit, and we intend to vigorously defend all claims brought by them.
We are not currently subject to anymaterial pending legal proceedings that could have a material adverse effect onimpact our operations; however, we may from timeresults of operations, financial condition or cash flows see Note 17. Legal Matters of the Notes to time become a party to various legal proceedings arisingCondensed Consolidated Financial Statements in the ordinary courseItem 1 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 additionThere have been no material changes to the other information set forth in this report, you should carefully consider theour 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, which could materially affect our business, financial condition 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 or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.  If any of the risks actually occur, our business, financial condition or results of operations could be negatively affected. In that case, the trading price of our stock could decline, and our stockholders may lose part or all of their investment.2023.


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
Rule 10b5-1 Trading Plans
None.There have been no changes to our Rule 10b5-1 Trading Plans as previously disclosed in Part II, Item 9B. included in our Annual Report on Form 10-K for the year ended December 31, 2023.


39
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.
10-K001-405743.1March 15, 2023
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
3.68-K000-520493.1June 30, 2021
3.7
Certificate of Amendment of the Restated Certificate of Incorporation of Synchronoss Technologies, Inc.
8-K001-405743.1December 7, 2023
10.1†
Transition and Separation Agreement dated December 31, 2023 between the Registrant and Christopher Hill.
X
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

†    Compensation agreement.

40
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.
/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/ Louis Ferraro
Louis Ferraro
/s/Karen L. Rosenberger
Karen L. Rosenberger
Executive Vice President, Chief Financial Officer
and Treasurer

November 8, 2016


May 9, 2024
36
41