Synchronoss Technologies, Inc. Announces Fourth Quarter and Full Year 2012 Financial Results
Synchronoss Technologies, Inc. Announces Fourth Quarter and Full Year 2012
Financial Results
* Non-GAAP total revenue of $73.9 million increases 19% year-over-year
* Non-GAAP operating income of $18.7 million represents 25% operating margin
* Non-GAAP EPS of $0.29 exceeds the high-end of our expectations
Business Wire
BRIDGEWATER, N.J. -- February 7, 2013
Synchronoss Technologies, Inc. (NASDAQ: SNCR), the mobile innovation company
that provides personal cloud solutions and software-based activation for
connected devices across the globe, today announced financial results for the
fourth quarter and full year 2012.
“The company’s strong business momentum contributed to revenue and
profitability that were above the high end of our expectations for the fourth
quarter,” said Stephen G. Waldis, Founder and Chief Executive Officer of
Synchronoss. “2012 was a transformational year for Synchronoss. Mobile
operators began to solidify their cloud strategies, and we achieved our goal
of winning cloud services engagements with several of the largest mobile
operators around the globe. In addition, our recent acquisition of NewBay
further expands our market share, our Personal Cloud platform functionality
and our customer relationships.”
Waldis added, “As we look ahead, we are very optimistic about Synchronoss’
future as we are positioned to take advantage of certain powerful industry
drivers such as the growth in connected devices and cloud services. We remain
on track to deploy our Personal Cloud platform with multiple major operators
over the course of 2013, and we believe Synchronoss is poised to deliver
strong growth on a sustained basis as our customers launch, scale and expand
their cloud services.”
On a GAAP basis, Synchronoss reported net revenues of $73.2 million,
representing an increase of 18% compared to the fourth quarter of 2011. Gross
profit was $41.9 million and income from operations was $6.6 million in the
fourth quarter of 2012. Net income applicable to common stock was $3.4
million, leading to diluted earnings per share of $0.09, compared to $0.21 for
the fourth 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 $73.9 million, an increase of 19% compared to the fourth quarter of 2011.
Gross profit for the fourth quarter of 2012 was $44.2 million, representing a
gross margin of 60%. Income from operations was $18.7 million in the fourth
quarter of 2012, representing a year-over-year increase of 18% and an
operating margin of 25%. Net income was $11.1 million in the fourth quarter of
2012, down from $13.3 million in the year ago period due to a higher tax rate
in the fourth quarter of 2012 caused by the delayed renewal of federal
research and development tax credits in the United States. Diluted earnings
per share were $0.29 for the fourth quarter of 2012, above the high-end of our
expectations and compared to $0.34 for the fourth quarter of 2011.
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."
“We are pleased with the leverage displayed in Synchronoss’ business model
during 2012. While we invested heavily in the company’s Personal Cloud
platform and global distribution, Synchronoss delivered a record annual
non-GAAP gross margin of 60% along with 200 basis points of non-GAAP operating
margin expansion,” said Lawrence R. Irving, Chief Financial Officer and
Treasurer. “We believe there is additional, leverage in our financial model
over time as our Tier 1 carrier customers deploy and scale our higher margin
cloud platform.”
Other Fourth Quarter and Recent Business Highlights:
* Business outside of the AT&T relationship accounted for approximately
$43.6 million of non-GAAP revenue, representing approximately 59% 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
$30.3 million of non-GAAP revenue, representing the other 41% of total
revenue.
* During December 2012, Synchronoss acquired NewBay, a wholly owned
subsidiary of Blackberry (formerly Research in Motion), for $55.5 million
in cash. NewBay’s technology assets and millions of worldwide subscribers
further establish Synchronoss as the leader in providing cloud based
mobile content services for mobile operators around the world. NewBay also
bolsters Synchronoss’ international presence, including its relationship
with several mobile operators in Europe.
Full Year 2012 Summary Financial Results
* On a GAAP basis: Revenues for the full year 2012 were $273.7 million, an
increase of 19% compared to $229.1 million in the prior year. Gross profit
was $158.0 million for the full year 2012. Income from operations was
$41.5 million and net income was $27.1 million, leading to full year 2012
diluted earnings per share of $0.69.
* On a Non-GAAP basis: Revenues for the full year 2012 were $275.2 million,
an increase of 19% compared to $230.5 million in the prior year. Gross
profit for the full year 2012 was $164.3 million, representing a gross
margin of 60%. Income from operations was $69.8 million for the full year
2012 and represented an operating margin of 25%. Net income was $43.2
million for the full year 2012, leading to diluted earnings per share of
$1.10, an increase from $0.98 in the prior year.
Conference Call Details
In conjunction with this announcement, Synchronoss will host a conference call
on Thursday, February 7, 2013, at 4:30 p.m. (ET) to discuss the company's
financial results. To access this call, dial 866-700-7101 (domestic) or
617-213-8837 (international). The pass code for the call is 44264651.
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 55365997.
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 personal cloud solutions and software-based activation 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)
December 31,
2012 2011
ASSETS
Current assets:
Cash and cash equivalents $ 36,028 $ 69,430
Marketable securities 20,188 51,504
Accounts receivable, net of allowance for
doubtful accounts of $258 and $356 at 77,565 57,387
December 31, 2012 and 2011, respectively
Prepaid expenses and other assets 19,009 16,061
Deferred tax assets 4,114 3,938
Total current assets 156,904 198,320
Marketable securities 653 31,642
Property and equipment, net 58,162 34,969
Goodwill 115,517 54,617
Intangible assets, net 110,760 63,969
Deferred tax assets 6,961 12,606
Other assets 3,482 2,495
Total assets $ 452,439 $ 398,618
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 8,980 $ 7,712
Accrued expenses 37,069 24,153
Deferred revenues 11,320 8,834
Contingent consideration obligation 3,279 4,735
Total current liabilities 60,648 45,434
Lease financing obligation - long term 9,540 9,241
Contingent consideration obligation - 5,100 8,432
long-term
Other liabilities 2,494 948
Stockholders’ equity:
Preferred stock, $0.0001 par value; 10,000
shares authorized, 0 shares issued and — —
outstanding at December 31, 2012 and 2011
Common stock, $0.0001 par value; 100,000
shares authorized, 42,533 and 41,063 shares 4 4
issued; 38,674 and 38,394 outstanding at
December 31, 2012 and 2011, respectively
Treasury stock, at cost (3,859 and 2,669
shares at December 31, 2012 and 2011, (67,918 ) (43,712 )
respectively
Additional paid-in capital 344,469 307,586
Accumulated other comprehensive loss (365 ) (699 )
Retained earnings 98,467 71,384
Total stockholders’ equity 374,657 334,563
Total liabilities and stockholders’ equity $ 452,439 $ 398,618
SYNCHRONOSS TECHNOLOGIES, INC.
STATEMENT OF INCOME
(in thousands, except per share data)
(Unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
2012 2011 2012 2011
Net revenues $ 73,181 $ 62,151 $ 273,692 $ 229,084
Costs and
expenses:
Cost of services 31,282 28,325 115,670 106,595
(2)(3)(4)*
Research and
development 14,216 10,504 52,307 41,541
(2)(3)(4)
Selling, general
and 14,952 12,973 46,680 44,886
administrative
(2)(3)(4)
Net change in
contingent (500 ) (357 ) (6,235 ) 2,954
consideration
obligation
Depreciation and 6,611 3,710 23,812 14,739
amortization
Total costs and 66,561 55,155 232,234 210,715
expenses
Income from 6,620 6,996 41,458 18,369
operations
Interest income 292 349 1,315 821
Interest expense (296 ) (255 ) (998 ) (928 )
Other income 303 (43 ) 889 97
(expense) (5)
Income before
income tax 6,919 7,047 42,664 18,359
expense
Income tax
expense (3,470 ) 1,161 (15,581 ) (3,233 )
(benefit)
Net income $ 3,449 $ 8,208 $ 27,083 $ 15,126
Net income per
common share:
Basic (1) $ 0.09 $ 0.22 $ 0.71 $ 0.44
Diluted (1) $ 0.09 $ 0.21 $ 0.69 $ 0.43
Weighted-average
common shares
outstanding:
Basic 37,894 37,683 38,195 37,372
Diluted 38,631 38,755 39,126 38,619
* 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 $ 3,449 $ 8,208 $ 27,083 $ 15,126
Income effect
for equity
mark-to-market
on contingent - - - 1,466
consideration
obligation, net
of tax
Net income
applicable to
shares of common $ 3,449 $ 8,208 $ 27,083 $ 16,592
stock for
earnings per
share
(2) Amounts
include fair
value
stock-based
compensation as
follows:
Cost of services $ 1,183 $ 1,308 $ 4,244 $ 4,981
Research and 1,585 1,579 5,441 4,510
development
Selling, general
and 3,270 2,725 10,740 11,236
administrative
Total fair value
stock-based $ 6,038 $ 5,612 $ 20,425 $ 20,727
compensation
expense
(3) Amounts
include
acquisition and
restructuring
costs as
follows:
Cost of services $ 73 $ - $ 73 $ 15
Research and 76 - 285 253
development
Selling, general
and 2,886 2,149 3,310 2,491
administrative
Total
acquisition and $ 3,035 $ 2,149 $ 3,668 $ 2,759
restructuring
costs
(4) Amounts
include fair
value earn-out
cash and stock
compensation as
follows:
Cost of services $ 283 $ 82 $ 482 $ 432
Research and 161 264 630 1,023
development
Selling, general
and 227 303 546 2,448
administrative
Total fair value
earn-out cash
and stock $ 671 $ 649 $ 1,658 $ 3,903
compensation
expense
(5) Amounts
include Fx
change of the
contingent
consideration
obligation as
follows:
Other (expense) $ (62 ) $ - $ 20 $ -
income
SYNCHRONOSS TECHNOLOGIES, INC.
Reconciliation of GAAP to Non-GAAP Financial Measures
(in thousands, except per share data)
(Unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
2012 2011 2012 2011
Non-GAAP
financial
measures and
reconciliation:
GAAP Revenue $ 73,181 $ 62,151 $ 273,692 $ 229,084
Add: Deferred
Revenue 736 150 1,484 1,387
Write-Down
Non-GAAP $ 73,917 $ 62,301 $ 275,176 $ 230,471
Revenue
GAAP Revenue $ 73,181 $ 62,151 $ 273,692 $ 229,084
Less: Cost of 31,282 28,325 115,670 106,595
Services
GAAP Gross 41,899 33,826 158,022 122,489
Margin
Add: Deferred
revenue 736 150 1,484 1,387
write-down
Add: Fair value
stock-based 1,183 1,308 4,244 4,981
compensation
Add:
Acquisition and 73 - 73 15
restructuring
costs
Add: Deferred
compensation 283 82 482 432
expense -
earn-out
Non-GAAP Gross $ 44,174 $ 35,366 $ 164,305 $ 129,304
Margin
Non-GAAP Gross 60 % 57 % 60 % 56 %
Margin %
GAAP income $ 6,620 $ 6,996 $ 41,458 $ 18,369
from operations
Add: Deferred
revenue 736 150 1,484 1,387
write-down
Add: Fair value
stock-based 6,038 5,612 20,425 20,727
compensation
Add:
Acquisition and 3,035 2,149 3,668 2,759
restructuring
costs
Add: Net change
in contingent (500 ) (357 ) (6,235 ) 2,954
consideration
obligation
Add: Deferred
compensation 671 649 1,658 3,903
expense -
earn-out
Add:
Amortization 2,110 660 7,360 2,640
expense
Non-GAAP income $ 18,710 $ 15,859 $ 69,818 $ 52,739
from operations
GAAP net income
attributable to $ 3,449 $ 8,208 $ 27,083 $ 15,126
common
stockholders
Add: Deferred
revenue 473 61 959 922
write-down, net
of tax
Add: Fair value
stock-based 3,865 3,253 13,199 13,773
compensation,
net of tax
Add:
Acquisition and
restructuring 1,956 1,409 2,370 1,833
costs, net of
taxes
Add: Net change
in contingent
consideration (438 ) (341 ) (6,255 ) 1,963
obligation, net
of Fx change,
net of tax
Add: Deferred
compensation
expense - 430 330 1,071 2,594
earn-out, net
of tax
Add:
Amortization 1,348 376 4,756 1,754
expense, net of
tax
Non-GAAP net $ 11,083 $ 13,296 $ 43,183 $ 37,965
income
Diluted
non-GAAP net $ 0.29 $ 0.34 $ 1.10 $ 0.98
income per
share
Weighted shares
outstanding - 38,631 38,755 39,126 38,619
Diluted
SYNCHRONOSS TECHNOLOGIES, INC.
STATEMENT OF CASH FLOWS
(in thousands)
(Unaudited)
Year Ended December 31,
2012 2011
Operating activities:
Net income $ 27,083 $ 15,126
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization expense 23,812 14,739
Loss on disposal of asset 230 —
Amortization of bond premium 1,216 622
Proceeds from insurance claim — (199 )
Deferred income taxes 1,475 (642 )
Non-cash interest on leased facility 921 918
Stock-based compensation 20,425 22,051
Changes in operating assets and
liabilities:
Accounts receivable, net of allowance for (11,611 ) (19,409 )
doubtful accounts
Prepaid expenses and other current assets 8,129 597
Other assets (496 ) (349 )
Accounts payable and accrued expenses (631 ) 7,695
Contingent consideration obligation (8,211 ) 2,188
Excess tax benefit from the exercise of (6,920 ) (3,575 )
stock options
Other liabilities (497 ) (183 )
Deferred revenues 949 3,006
Net cash provided by operating activities 55,874 42,585
Investing activities:
Purchases of fixed assets (33,234 ) (14,732 )
Proceeds from insurance claim — 199
Purchases of marketable securities (13,146 ) (82,098 )
available-for-sale
Sales and maturities of marketable 74,334 7,259
securities available-for-sale
Business acquired, net of cash (105,177 ) (55,752 )
Net cash used in investing activities (77,223 ) (145,124 )
Financing activities:
Proceeds from the exercise of stock 7,949 17,707
options
Payments on contingent consideration (2,268 ) (8,533 )
obligation
Excess tax benefit from the exercise of 6,920 3,576
stock options
Repurchase of common stock (24,615 ) (19,999 )
Proceeds from the sale of Treasury Stock
in connection with an employee stock 612 —
purchase plan
Payments on capital obligations (1,015 ) (945 )
Net cash (used in) provided by financing (12,417 ) (8,194 )
activities
Effect of exchange rate changes on cash 364 (204 )
Net decrease in cash and cash equivalents (33,402 ) (110,937 )
Cash and cash equivalents at beginning of 69,430 180,367
year
Cash and cash equivalents at end of period $ 36,028 $ 69,430
SYNCHRONOSS TECHNOLOGIES, INC.
Reconciliation of GAAP to Non-GAAP Cash Provided by Operating Activities
(in thousands)
(Unaudited)
Year Ended December 31,
2012 2011
Non-GAAP cash provided by operating activities
and reconciliation:
Net cash provided by operating activities (GAAP) $ 55,874 $ 42,585
Add: Tax benefits from stock options exercised 6,920 3,575
Add: Cash payments on settlement of Earn-out 3,533 3,026
Adjusted cash flow provided by operating $ 66,327 $ 49,186
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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