Synchronoss Technologies, Inc. Announces Third Quarter 2012 Financial Results

  Synchronoss Technologies, Inc. Announces Third Quarter 2012 Financial
  Results

  *Non-GAAP total revenue of $69.2 million increases 17% year-over-year
  *Non-GAAP operating income of $18.4 million increases 40% year-over-year
    and represents 27% non-GAAP operating margin
  *Non-GAAP EPS of $0.28 increases 22% year-over-year

Business Wire

BRIDGEWATER, N.J. -- November 05, 2012

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
2012.

“The company’s solid execution during the third quarter led to revenue and
profitability that were consistent with our guidance,” said Stephen G. Waldis,
Founder and Chief Executive Officer of Synchronoss. “During the third quarter,
we focused on the development of our cloud platform deployments with four of
the largest mobile operators in the world. We believe we are at the early
stages of significant long-term growth opportunities and are making great
progress in establishing Synchronoss’ mobile content management cloud platform
as the de facto standard for Tier 1 carriers around the globe.”

On a GAAP basis, Synchronoss reported net revenues of $69.0 million,
representing an increase of 16% compared to the third quarter of 2011. Gross
profit was $39.8 million and income from operations was $11.2 million in the
third quarter of 2012. Net income applicable to common stock was $6.2 million,
leading to diluted earnings per share of $0.16, compared to $0.09 for the
third quarter of 2011.

On a non-GAAP basis, Synchronoss reported net revenues, which adds back the
purchase accounting adjustment related to revenues for certain acquisitions,
of $69.2 million, an increase of 17% compared to the third quarter of 2011.
Gross profit for the third quarter of 2012 was $41.2 million, representing a
gross margin of 60%. Income from operations was $18.4 million in the third
quarter of 2012, representing a year-over-year increase of 40% and an
operating margin of 27%. Net income was $10.7 million in the third quarter of
2012, leading to diluted earnings per share of $0.28, an increase of 22%
compared to $0.23 for the third quarter of 2011.

A reconciliation of GAAP to non-GAAP results has been provided in the
financial statement tables included in this press release, as well as nine
months year to date results. An explanation of these measures is also included
below under the heading "Non-GAAP Financial Measures."

“The combination of solid revenue growth and leverage in our business led to
40% growth in non-GAAP operating income, along with a non-GAAP operating
margin of 27% that was at the highest level for the company in the last 4
years,” said Lawrence R. Irving, Chief Financial Officer and Treasurer. “As we
look ahead, we are increasing investments in our industry leading activation
and cloud-based content management platforms to support deployments and
incremental opportunities with our major Tier 1 carrier customers. We believe
there will be a significant payback on our investments over the long-term as
the fastest growing segment of our business is expected to come from higher
margin, cloud-based content management services.”

Other Third Quarter and Recent Business Highlights:

  *Business outside of the AT&T relationship accounted for approximately
    $37.2 million of non-GAAP revenue, representing approximately 54% of total
    revenue. Verizon Wireless 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
    $32.0 million of non-GAAP revenue, representing the other 46% of total
    revenue.
  *Non-GAAP cash flow provided by operations was $44.9 million for the first
    nine months of 2012 representing an increase of 19% year-over-year and the
    Company repurchased $13.9 million of common stock for the same period.

Conference Call Details

In conjunction with this announcement, Synchronoss will host a conference call
on Monday, November 5, 2012, at 4:30 p.m. (ET) to discuss the company's
financial results. To access this call, dial 800-299-8538 (domestic) or
617-786-2902 (international). The pass code for the call is 95394973.
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 is 72170879. An
archived web cast of this conference call will also be available on the
“Investor Relations” page of the company’s web site, www.synchronoss.com.

Non-GAAP Financial Measures

Synchronoss has provided in this release selected financial information that
has not been prepared in accordance with GAAP. This information includes
historical non-GAAP revenues, gross profit, operating income, net income,
effective tax rate, earnings per share and cash flows from operating
activities. Synchronoss uses these non-GAAP financial measures internally in
analyzing its financial results and believes they are useful to investors, as
a supplement to GAAP measures, in evaluating Synchronoss’ ongoing operational
performance. Synchronoss believes that the use of these non-GAAP financial
measures provides an additional tool for investors to use in evaluating
ongoing operating results and trends, and in comparing its financial results
with other companies in Synchronoss’ industry, many of which present similar
non-GAAP financial measures to investors. As noted, the non-GAAP financial
results discussed above add back the deferred revenue write-down associated
with acquisitions, fair value stock-based compensation expense,
acquisition-related costs, changes in the contingent consideration obligation,
deferred compensation expense related to earn outs and amortization of
intangibles associated with acquisitions.

Non-GAAP financial measures should not be considered in isolation from, or as
a substitute for, financial information prepared in accordance with GAAP.
Investors are encouraged to review the reconciliation of these non-GAAP
measures to their most directly comparable GAAP financial measures as detailed
above. As previously mentioned, a reconciliation of GAAP to non-GAAP results
has been provided in the financial statement tables included in this press
release.

About Synchronoss Technologies, Inc.

Synchronoss Technologies (NASDAQ: SNCR) is the mobile innovation company that
provides software-based activation and mobile content management solutions for
connected devices across the globe. The company’s proven and scalable
technology solutions allow customers to connect, synchronize and activate
connected devices and services that empower enterprises and consumers to live
in a connected world. For more information visit us at:

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, 2011 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, 2012     December 31, 2011
                                                             
ASSETS
Current assets:
Cash and cash equivalents             $    52,736            $   69,430
Marketable securities                      65,260                51,504
Accounts receivable, net of
allowance for doubtful accounts
of $285 and $356 at September 30,          65,985                57,387
2012 and December
31, 2011, respectively
Prepaid expenses and other assets          15,022                16,061
Deferred tax assets                       3,879               3,938     
                                                             
Total current assets                       202,882               198,320
Marketable securities                      14,599                31,642
Property and equipment, net                49,419                34,969
Goodwill                                   67,841                54,617
Intangible assets, net                     73,770                63,969
Deferred tax assets                        11,304                12,606
Other assets                              2,118               2,495     
                                                             
Total assets                          $    421,933          $   398,618   
                                                             
                                                             
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Accounts payable                      $    5,549             $   7,712
Accrued expenses                           22,413                24,153
Deferred revenues                          6,624                 8,834
Contingent consideration                  3,594               4,735     
obligation
                                                             
Total current liabilities                  38,180                45,434
Lease financing obligation - long          9,257                 9,241
term
Contingent consideration                   -                     8,432
obligation - long-term
Other liabilities                          856                   948
Stockholders’ equity:
Preferred stock, $0.0001 par
value; 10,000 shares authorized,
0 shares issued and                        —                     —
outstanding at September 30,
2012 and December 31, 2011
Common stock, $0.0001 par value;
100,000 shares authorized, 42,150
and 41,063 shares
issued; 38,826 and 38,394                4                     4
outstanding at September 30, 2012
and December 31, 2011,
respectively
Treasury stock, at cost (3,324
and 2,669 shares at September 30,          (57,201   )           (43,712   )
2012 and December 31, 2011,
respectively)
Additional paid-in capital                 336,098               307,586
Accumulated other comprehensive            (279      )           (699      )
loss
Retained earnings                         95,018              71,384    
                                                             
Total stockholders’ equity                373,640             334,563   
                                                             
Total liabilities and                 $    421,933          $   398,618   
stockholders’ equity

                                                          
                                                                   
SYNCHRONOSS TECHNOLOGIES, INC.
STATEMENT OF INCOME
(in thousands, except per share data)
(Unaudited)
                                                                   
                     Three Months Ended            Nine Months Ended September
                     September 30,                 30,
                      2012         2011         2012          2011    
                                                                   
Net revenues         $ 68,961       $ 59,238       $ 200,511       $ 166,933
Costs and
expenses:
Cost of services       29,136         27,781         84,388          78,270
(2)(3)(4)*
Research and
development            12,645         10,879         38,091          31,037
(2)(3)(4)
Selling, general
and                    10,278         11,118         31,728          31,913
administrative
(2)(3)(4)
Net change in
contingent             (327   )       480            (5,735  )       3,311
consideration
obligation
Depreciation and      6,068        3,949        17,201        11,029  
amortization
                                                                   
Total costs and       57,800       54,207       165,673       155,560 
expenses
                                                                   
Income from            11,161         5,031          34,838          11,373
operations
Interest income        295            216            1,023           472
Interest expense       (222   )       (198   )       (702    )       (673    )
Other (expense)       (207   )      (27    )      586           140     
income (5)
                                                                   
Income before
income tax             11,027         5,022          35,745          11,312
expense
Income tax            (4,825 )      (1,447 )      (12,111 )      (4,394  )
expense
                                                                   
Net income           $ 6,202       $ 3,575       $ 23,634       $ 6,918   
                                                                   
Net income per
common share:
Basic (1)            $ 0.16        $ 0.10        $ 0.62         $ 0.22    
                                                                   
Diluted (1)          $ 0.16        $ 0.09        $ 0.60         $ 0.22    
                                                                   
Weighted-average
common shares
outstanding:
Basic                 38,107       37,573       38,219        37,285  
                                                                   
Diluted               38,872       38,647       39,192        38,610  
                                                                   
* 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           $ 6,202        $ 3,575        $ 23,634        $ 6,918
Income effect
for equity
mark-to-market
on contingent         -            -            -             1,466   
consideration
obligation, net
of tax
                                                                   
Net income
applicable to
shares of common     $ 6,202       $ 3,575       $ 23,634       $ 8,384   
stock for
earnings per
share
                                                                   
(2) Amounts
include fair
value
stock-based
compensation as
follows:
Cost of services     $ 925          $ 1,416        $ 3,061         $ 3,673
Research and           1,201          1,146          3,856           2,931
development
Selling, general
and                   2,511        3,326        7,470         8,511   
administrative
                                                                   
Total fair value
stock-based          $ 4,637       $ 5,888       $ 14,387       $ 15,115  
compensation
expense
                                                                   
(3) Amounts
include
acquisition and
restructuring
costs as
follows:
Cost of services     $ -            $ -            $ -             $ 15
Research and           -              4              209             253
development
Selling, general
and                   -            59           424           342     
administrative
                                                                   
Total
acquisition and      $ -           $ 63          $ 633          $ 610     
restructuring
costs
                                                                   
(4) Amounts
include fair
value earn-out
cash and stock
compensation as
follows:
Cost of services     $ 199          $ 105          $ 199           $ 350
Research and           353            326            469             759
development
Selling, general
and                   183          435          319           2,145   
administrative
                                                                   
Total fair value
earn-out cash
and stock            $ 735         $ 866         $ 987          $ 3,254   
compensation
expense
                                                                   
(5) Amounts
include Fx
change of the
contingent
consideration
obligation as
follows:
Other (expense)      $ (32    )     $ -            $ 82            $ -
income
                                                                   
                                                                   
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
                     September 30,                 30,
                      2012         2011         2012          2011    
                                                                   
Non-GAAP
financial
measures and
reconciliation:
                                                                   
GAAP Revenue         $ 68,961       $ 59,238       $ 200,511       $ 166,933
Add: Deferred
Revenue               232          150          748           1,237   
Write-Down
                                                                   
Non-GAAP Revenue     $ 69,193      $ 59,388      $ 201,259      $ 168,170 
                                                                   
GAAP Revenue         $ 68,961       $ 59,238       $ 200,511       $ 166,933
Less: Cost of         29,136       27,781       84,388        78,270  
Services
                                                                   
GAAP Gross             39,825         31,457         116,123         88,663
Margin
                                                                   
Add: Deferred
revenue                232            150            748             1,237
write-down
Add: Fair value
stock-based            925            1,416          3,061           3,673
compensation
Add: Acquisition
and                    -              -              -               15
restructuring
costs
Add: Deferred
compensation          199          105          199           350     
expense -
earn-out
                                                                   
Non-GAAP Gross       $ 41,181      $ 33,128      $ 120,131      $ 93,938  
Margin
                                                                   
Non-GAAP Gross         60     %       56     %       60      %       56      %
Margin %
                                                                   
GAAP income from     $ 11,161       $ 5,031        $ 34,838        $ 11,373
operations
Add: Deferred
revenue                232            150            748             1,237
write-down
Add: Fair value
stock-based            4,637          5,888          14,387          15,115
compensation
Add: Acquisition
and                    -              63             633             610
restructuring
costs
Add: Net change
in contingent          (327   )       480            (5,735  )       3,311
consideration
obligation
Add: Deferred
compensation           735            866            987             3,254
expense -
earn-out
Add:
Amortization          1,955        660          5,250         1,980   
expense
                                                                   
Non-GAAP income      $ 18,393      $ 13,138      $ 51,108       $ 36,880  
from operations
                                                                   
GAAP net income
attributable to      $ 6,202        $ 3,575        $ 23,634        $ 6,918
common
stockholders
Add: Deferred
revenue                148            78             486             861
write-down, net
of tax
Add: Fair value
stock-based            2,954          3,877          9,334           10,520
compensation,
net of tax
Add: Acquisition
and
restructuring          -              30             414             424
costs, net of
taxes
Add: Net change
in contingent
consideration          (295   )       265            (5,817  )       2,304
obligation, net
of Fx change,
net of tax
Add: Deferred
compensation
expense -              476            544            641             2,264
earn-out, net of
tax
Add:
Amortization          1,252        427          3,408         1,378   
expense, net of
tax
                                                                   
Non-GAAP net         $ 10,737      $ 8,796       $ 32,100       $ 24,669  
income
                                                                   
Diluted non-GAAP
net income per       $ 0.28        $ 0.23        $ 0.82         $ 0.64    
share
                                                                
Weighted shares
outstanding -         38,872       38,647       39,192        38,610  
Diluted

                                                              
                                                                   
SYNCHRONOSS TECHNOLOGIES, INC.
STATEMENT OF CASH FLOWS
(in thousands)
(Unaudited)
                                                                   
                                               Nine Months Ended September 30,
                                                 2012             2011    
                                                                   
Operating activities:
Net income                                     $  23,634           $ 6,918
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization expense             17,199             11,029
Loss on disposal of asset                         198                —
Amortization of bond premium                      1,000              326
Deferred income taxes                             32                 (2,920  )
Non-cash interest on leased facility              690                688
Stock-based compensation                          14,387             16,173
Changes in operating assets and
liabilities:
Accounts receivable, net of allowance for         (6,733   )         (10,291 )
doubtful accounts
Prepaid expenses and other current assets         7,022              3,376
Other assets                                      (122     )         (26     )
Accounts payable                                  (2,665   )         (698    )
Accrued expenses                                  (3,042   )         2,973
Contingent consideration obligation               (8,396   )         2,640
Excess tax benefit from the exercise of           (6,592   )         (7,335  )
stock options
Other liabilities                                 (146     )         (281    )
Deferred revenues                                (1,707   )        5,314   
Net cash provided by operating activities         34,759             27,886
                                                                   
Investing activities:
Purchases of fixed assets                         (25,377  )         (12,042 )
Purchases of marketable securities                (13,082  )         (35,757 )
available-for-sale
Maturity of marketable securities                 15,531             3,670
available-for-sale
Business acquired, net of cash                   (26,572  )        (7,913  )
Net cash used in investing activities             (49,500  )         (52,042 )
                                                                   
Financing activities:
Proceeds from the exercise of stock               7,330              14,163
options
Payments on contingent consideration              (2,268   )         (8,286  )
obligation
Excess tax benefit from the exercise of           6,592              7,335
stock options
Repurchase of common stock                        (13,898  )         (19,999 )
Proceeds from the sale of Treasury Stock
in connection with an employee stock              612                —
purchase plan
Proceeds from capital obligations                 38                 —
Payments on capital obligations                  (750     )        (721    )
Net cash used in financing activities             (2,344   )         (7,508  )
Effect of exchange rate changes on cash          391              (92     )
Net decrease in cash and cash equivalents         (16,694  )         (31,756 )
Cash and cash equivalents at beginning of        69,430           180,367 
year
Cash and cash equivalents at end of period     $  52,736          $ 148,611 

                                                             
                                                                    
SYNCHRONOSS TECHNOLOGIES, INC.
Reconciliation of GAAP to Non-GAAP Cash Provided by Operating Activities
(in thousands)
(Unaudited)
                                                                    
                                               Nine Months Ended September 30,
                                                  2012               2011
Non-GAAP cash provided by operating
activities and reconciliation:
                                                                    
Net cash provided by operating activities      $   34,759           $  27,886
(GAAP)
Add: Tax benefits from stock options               6,592               7,335
exercised
Add: Cash payments on settlement of               3,533              2,578
Earn-out
                                                                    
Adjusted cash flow provided by operating       $   44,884           $  37,799
activities (Non-GAAP)

Contact:

Synchronoss Technologies, Inc.
Investor:
Brian Denyeau, 646-277-1251
investor@synchronoss.com
or
Media:
Stacie Hiras, 908-547-1260
Stacie.hiras@synchronoss.com
 
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