750 Route 202 South Suite 600 Bridgewater, NJ 08807
Press Release:
SYNCHRONOSS TECHNOLOGIES, INC. ANNOUNCES
THIRD QUARTER 2011 FINANCIAL RESULTS
•
Non-GAAP total revenue of $59.4 million increases 27% year-over-year
•
Non-GAAP operating income of $13.1 million increases 36% year-over-year
•
Non-GAAP EPS of $0.23 increases 15% year-over-year
BRIDGEWATER, NJ – November 1, 2011–Synchronoss Technologies, Inc. (NASDAQ: SNCR), the world’s leading provider of transaction management, cloud enablement and connectivity services for connected devices, today announced financial results for the third quarter of 2011.
Stephen G. Waldis, President and Chief Executive Officer of Synchronoss, said “We continue to make excellent progress scaling our relationships with a number of new strategic, tier one service providers. Our continued progress with Verizon and Vodafone helped us achieve solid growth in our business during the quarter. We also moved into production with a new significant channel at AT&T, which contributed to the best quarter in our 10 year relationship with AT&T.”
Waldis added, “The growing adoption of our ConvergenceNow® Plus+ platform, as evidenced by our partnership announced with Verizon and our new expansion at Vodafone, will help drive a truly unique experience for subscribers around the world. With the rapid growth of connected devices, we believe our “connect-sync-activate” approach to this market will help position Synchronoss as the market leader.”
For the third quarter of 2011, Synchronoss reported net revenues of $59.2 million on a GAAP basis, representing an increase of 33% compared to the third quarter of 2010. Gross profit was $31.5 million and income from operations was $5.0 million in the third quarter of 2011. GAAP net income applicable to common stock was $3.6 million, leading to GAAP diluted earnings per share of $0.09, compared to $0.05 for the third quarter of 2010.
Synchronoss reported non-GAAP net revenues for the third quarter of 2011, which adds back the purchase accounting adjustment related to FusionOne’s revenues, of $59.4 million, an increase of 27% compared to the third quarter of 2010. Non-GAAP gross profit for the third quarter of 2011 was $33.1 million, representing a non-GAAP gross margin of 56%. Non-GAAP income from operations was $13.1 million in the third quarter of 2011, representing a year-over-year increase of 36% and a non-GAAP operating margin of 22%. Non-GAAP net income was $8.8 million in the third quarter of 2011, leading to non-GAAP diluted earnings per share of $0.23, an increase of 15% compared with $0.20 for the third quarter of 2010.
A reconciliation of GAAP to non-GAAP results has been provided in the financial statement tables included in this press release. An explanation of these measures is also included below under the heading “Non-GAAP Financial Measures.”
“Solid execution and ramping customer initiatives drove strong third quarter revenue and profitability that were both above the high-end of our guidance,” said Lawrence R. Irving, Chief Financial Officer and Treasurer. “The investments that Synchronoss has made in R&D are paying off, evidenced by the early traction of our SmartMobility product, our ConvergenceNow® Plus+ win at Vodafone that was driven by our content synchronization capabilities and expansion into on-device and retail store upgrade activations with AT&T as part of the iPhone 4S launch. We plan to continue investing in our business to solidify Synchronoss’ leadership position and long-term growth opportunity.”
Other Third Quarter and Recent Business Highlights:
•
Business outside of the AT&T relationship accounted for approximately $29.9 million of non-GAAP revenue, representing approximately 50% of total non-GAAP revenue. Verizon remained the largest contributor to Synchronoss’ business outside of AT&T, representing over 10% of Synchronoss’ revenue for the quarter. Business related to AT&T accounted for approximately $29.5 million of non-GAAP revenue, representing the other 50% of total non-GAAP revenue.
•
During the third quarter, Synchronoss hosted a user summit with leading OEM’s on its new connect-sync-activate platform. Verizon was a keynote speaker at this event where it communicated the need for a strong connection management solution as well as the benefits of Synchronoss’ connect-synch-activate strategy.
Conference Call Details
In conjunction with this announcement, Synchronoss will host a conference call on Tuesday, November 1, 2011, at 4:30 p.m. (ET) to discuss the company’s financial results. To access this call, dial 866-362-4829 (domestic) or 617-597-5346 (international). The pass code for the call is 74713975. Additionally, a live web cast of the conference call will be available on the “Investor Relations” page on the company’s web site,www.synchronoss.com.
Following the conference call, a replay will be available at 888-286-8010 (domestic) or 617-801-6888 (international). The replay pass code is 86725247. An archived web cast of this conference call will also be available on the “Investor Relations” page of the company’s web site,www.synchronoss.com.
Non-GAAP Financial Measures
Synchronoss has provided in this release selected financial information that has not been prepared in accordance with GAAP. This information includes historical non-GAAP revenues, operating income, net income, effective tax rate, and earnings per share. Synchronoss uses these non-GAAP financial measures internally in analyzing its financial results and believes they are useful to investors, as a supplement to GAAP measures, in evaluating Synchronoss’ ongoing operational performance. Synchronoss believes that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends, and in comparing its financial results with other companies in Synchronoss’ industry, many of which present similar non-GAAP financial measures to investors. As noted, the non-GAAP financial results discussed above add back the deferred revenue write-down associated with FusionOne acquisition, fair value stock-based compensation expense, acquisition-related costs, changes in the contingent consideration obligation, deferred compensation expense related to earn outs and amortization of intangibles associated with acquisitions.
Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures as detailed above. As previously mentioned, a reconciliation of GAAP to non-GAAP results has been provided in the financial statement tables included in this press release.
About Synchronoss Technologies, Inc.
Synchronoss Technologies (NASDAQ: SNCR) is the world’s leading provider of transaction management, cloud enablement and connectivity services for connected devices. The company’s technology platforms ensure a simple and seamless on-demand channel for service providers and their customers. For more information visit us at:
Web:www.synchronoss.com
Blog:http://blog.synchronoss.com
Twitter:http://twitter.com/synchronoss
Forward-looking Statements
This document may include certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, plans, objectives, expectations and intentions and other statements contained in this press release that are not historical facts and statements identified by words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “outlook” or words of similar meanings. These statements are based on our current beliefs or expectations and are inherently subject to various risks and uncertainties, including those set forth under the caption “Risk Factors” in Synchronoss’ Annual Report on Form 10-K for the year ended December 31, 2010 and other documents filed with the U.S. Securities and Exchange Commission. Actual results may differ materially from these expectations due to changes in global political, economic, business, competitive, market and regulatory factors. Synchronoss does not undertake any obligation to update any forward-looking statements contained in this document as a result of new information, future events or otherwise.
The Synchronoss logo, Synchronoss, ConvergenceNow, InterconnectNow, ConvergenceNow Plus+ and SmartMobility are trademarks of Synchronoss Technologies, Inc. All other trademarks are property of their respective owners.
SYNCHRONOSS TECHNOLOGIES, INC. BALANCE SHEETS (in thousands, except per share data) (Unaudited)
September 30,
December 31,
2011
2010
ASSETS
Current assets:
Cash and cash equivalents
$
148,611
$
180,367
Marketable securities
18,145
1,766
Accounts receivable, net of allowance for doubtful accounts of $310 and $558 at September 30, 2011 and December 31, 2010, respectively
45,488
34,940
Prepaid expenses and other assets
12,566
8,606
Deferred tax assets
3,330
3,272
Total current assets
228,140
228,951
Marketable securities
22,862
7,502
Property and equipment, net
35,599
32,622
Goodwill
29,717
19,063
Intangible assets, net
31,629
33,231
Deferred tax assets
19,295
16,432
Other assets
2,228
2,598
Total assets
$
369,470
$
340,399
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
$
6,360
$
7,013
Accrued expenses
16,120
12,999
Deferred revenues
10,457
5,143
Contingent consideration obligation
5,434
—
Total current liabilities
38,371
25,155
Lease financing obligation — long term
9,235
9,205
Contingent consideration obligation — long-term
—
16,915
Other liabilities
821
1,101
Stockholders’ equity:
Preferred stock, $0.0001 par value; 10,000 shares authorized, 0 shares issued and
outstanding at September 30, 2011 and December 31, 2010
—
—
Common stock, $0.0001 par value; 100,000 shares authorized, 40,772 and 38,863 shares
issued; 38,103 and 36,863 outstanding at September 30, 2011 and December 31, 2010, respectively
4
4
Treasury stock, at cost (2,669 and 2,000 shares at September 30, 2011 and December 31, 2010, respectively)
(43,712
)
(23,713
)
Additional paid-in capital
301,924
255,656
Accumulated other comprehensive loss
(349
)
(182
)
Retained earnings
63,176
56,258
Total stockholders’ equity
321,043
288,023
Total liabilities and stockholders’ equity
$
369,470
$
340,399
SYNCHRONOSS TECHNOLOGIES, INC. STATEMENT OF INCOME (in thousands, except per share data) (Unaudited)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2011
2010
2011
2010
Net revenues
$
59,238
$
44,456
$
166,933
$
116,738
Costs and expenses:
Cost of services (2)(3)(4)*
27,781
22,983
78,270
59,638
Research and development (2)(3)(4)
10,879
7,569
31,037
16,760
Selling, general and administrative (2)(3)(4)
11,118
10,465
31,913
23,310
Net change in contingent consideration obligation
480
(1,968
)
3,311
(1,968
)
Depreciation and amortization
3,949
2,606
11,029
6,459
Total costs and expenses
54,207
41,655
155,560
104,199
Income from operations
5,031
2,801
11,373
12,539
Interest and other income
432
706
914
940
Interest and other expense
(441
)
(342
)
(975
)
(909
)
Income before income tax expense
5,022
3,165
11,312
12,570
Income tax expense
(1,447
)
(1,024
)
(4,394
)
(4,742
)
Net income
$
3,575
$
2,141
$
6,918
$
7,828
Net income per common share:
Basic (1)
$
0.10
$
0.05
$
0.22
$
0.23
Diluted (1)
$
0.09
$
0.05
$
0.22
$
0.23
Weighted-average common shares outstanding:
Basic
37,573
31,586
37,285
31,276
Diluted
38,647
32,480
38,610
32,196
* Cost of services excludes depreciation which is shown separately.
(1) Adjustment to net income for equity mark-to-market on contingent consideration obligation:
Net income
$
3,575
$
2,141
$
6,918
$
7,828
Income effect for equity mark-to-market on contingent consideration obligation, net of tax
—
(591
)
1,466
(544
)
Net income applicable to shares of common stock for earnings per share
$
3,575
$
1,550
$
8,384
$
7,284
(2) Amounts include fair value stock-based compensation as follows:
Cost of services
$
1,416
$
1,063
$
3,673
$
2,819
Research and development
1,146
562
2,931
1,330
Selling, general and administrative
3,326
1,554
8,511
4,614
Total fair value stock-based compensation expense
$
5,888
$
3,179
$
15,115
$
8,763
(3) Amounts include acquisition and restructuring costs as follows:
Cost of services
$
—
$
—
$
15
$
—
Research and development
4
133
253
133
Selling, general and administrative
59
2,604
342
2,918
Total acquisition and restructuring costs
$
63
$
2,737
$
610
$
3,051
(4) Amounts include fair value earn-out cash and stock compensation as follows:
Cost of services
$
105
$
4
$
350
$
4
Research and development
326
29
759
29
Selling, general and administrative
435
22
2,145
22
Total fair value earn-out cash and stock compensation expense
$
866
$
55
$
3,254
$
55
SYNCHRONOSS TECHNOLOGIES, INC. Reconciliation of GAAP to Non-GAAP Financial Measures (in thousands, except per share data) (Unaudited)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2011
2010
2011
2010
Non-GAAP financial measures and reconciliation:
GAAP Revenue
$
59,238
$
44,456
$
166,933
$
116,738
Add: Deferred Revenue Write-Down
150
2,309
1,237
2,309
Non-GAAP Revenue
$
59,388
$
46,765
$
168,170
$
119,047
GAAP income from operations
$
5,031
$
2,801
$
11,373
$
12,539
Add: Deferred revenue write-down
150
2,309
1,237
2,309
Add: Fair value stock-based compensation
5,888
3,179
15,115
8,763
Add: Acquisition and restructuring costs
63
2,737
610
3,051
Add: Net change in contingent consideration obligation
480
(1,968
)
3,311
(1,968
)
Add: Deferred compensation expense — earn-out
866
55
3,254
55
Add: Amortization expense
660
525
1,980
525
Non-GAAP income from operations
$
13,138
$
9,638
$
36,880
$
25,274
GAAP net income attributable to common stockholders
$
3,575
$
2,141
$
6,918
$
7,828
Add: Deferred revenue write-down, net of tax
78
1,432
861
1,432
Add: Fair value stock-based compensation, net of tax
3,877
1,971
10,520
5,433
Add: Acquisition and restructuring costs, net of taxes
30
1,697
424
1,892
Add: Net change in contingent consideration obligation, net of tax
265
(1,220
)
2,304
(1,220
)
Add: Deferred compensation expense — earn-out, net of tax
544
34
2,264
34
Add: Amortization expense, net of tax
427
326
1,378
326
Non-GAAP net income
$
8,796
$
6,381
$
24,669
$
15,725
Diluted non-GAAP net income per share
$
0.23
$
0.20
$
0.64
$
0.49
Weighted shares outstanding — Diluted
38,647
32,480
38,610
32,196
SYNCHRONOSS TECHNOLOGIES, INC. STATEMENT OF CASH FLOWS (in thousands) (Unaudited)
Nine Months Ended September 30,
2011
2010
Operating activities:
Net income
$
6,918
$
7,828
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense
11,029
6,459
Loss on disposal of fixed assets
—
31
Proceeds from insurance claim
—
(418
)
Amortization of bond premium
326
—
Deferred income taxes
(2,920
)
818
Non-cash interest on leased facility
688
684
Stock-based compensation
16,173
8,763
Changes in operating assets and liabilities:
Accounts receivable, net of allowance for doubtful accounts
(10,291
)
(12,604
)
Prepaid expenses and other current assets
3,376
(1,780
)
Other assets
(26
)
(1,695
)
Accounts payable
(698
)
1,248
Accrued expenses
2,973
888
Contingent consideration obligation
2,640
(1,913
)
Excess tax benefit from the exercise of stock options
(7,335
)
(755
)
Other liabilities
(281
)
(285
)
Lease obligation
—
3
Deferred revenues
5,314
2,451
Net cash provided by operating activities
27,886
9,723
Investing activities:
Purchases of fixed assets
(12,042
)
(7,310
)
Proceeds from insurance claim
—
418
Purchases of marketable securities available-for-sale
(35,757
)
(4,296
)
Maturity of marketable securities available-for-sale
3,670
2,659
Business acquired, net of cash
(7,913
)
(30,779
)
Net cash used in investing activities
(52,042
)
(39,308
)
Financing activities:
Proceeds from the exercise of stock options
14,163
2,663
Payments on contingent consideration
(8,286
)
—
Excess tax benefit from the exercise of stock options
7,335
755
Repurchase of common stock
(19,999
)
—
Payments on capital obligations
(721
)
(684
)
Net cash (used in) provided by financing activities
(7,508
)
2,734
Effect of exchange rate changes on cash
(92
)
43
Net decrease in cash and cash equivalents
(31,756
)
(26,808
)
Cash and cash equivalents at beginning of year
180,367
89,924
Cash and cash equivalents at end of period
$
148,611
$
63,116
SYNCHRONOSS TECHNOLOGIES, INC. Reconciliation of GAAP to Non-GAAP Cash Provided by Operating Activities (in thousands) (Unaudited)
Nine Months Ended September 30,
2011
2010
Non-GAAP cash provided by operating activities and reconciliation:
Net cash provided by operating activities (GAAP)
$
27,886
$
9,723
Add: Tax benefits from stock options exercised
7,335
755
Add: Cash payments on settlement of Earn-out
2,578
—
Adjusted cash flow provided by operating activities (Non-GAAP)
$
37,799
$
10,478
SOURCE: Synchronoss Technologies, Inc.
Synchronoss Technologies, Inc. Investor: Tim Dolan, 617-956-6727 investor@synchronoss.com or Media: Stacie Hiras, 908-547-1260 Stacie.hiras@synchronoss.com
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