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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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