GlobeNewswire Inc | Aug 10, 2020 07:00AM EDT

August 10, 2020

BRIDGEWATER, N.J., Aug. 10, 2020 (GLOBE NEWSWIRE) -- Synchronoss Technologies Inc. (NASDAQ: SNCR), a global leader and innovator in cloud, messaging, digital and IoT platforms and products, today announced financial results for its second quarter ended June 30, 2020.

Second quarter highlights:

-- Revenue was $76.5 million, compared to $77.8 million in the second quarter of 2019. Recurring revenue was 78.4 percent. -- GAAP net loss for the quarter was $10.15 million, or 24 cents per share, compared to $25.0 million or 61 cents per share in the prior years second quarter. -- Non-GAAP net income from continuing operations attributable to Synchronoss was $6.6 million or 16 cent per share, compared to a Non-GAAP net loss of $11.3 million or 28 cents per share in the prior years second quarter. -- Synchronoss delivered $11.5 million of adjusted EBITDA, compared to $8.7 million in the second quarter of 2019. Adjusted EBITDA margin in the second quarter was 15 percent compared to 11.2 percent in last years second quarter. -- Positive Adjusted Free Cash Flow of $13 million drove an increase in cash and liquidity to $42.8 million at quarter end up from $31m at the end of Q1. -- This morning, in a separate release, the company announced the 5-year renewal of its white-label cloud agreement with its largest customer, Verizon Wireless.

Glenn Lurie, president and chief executive officer, stated, Synchronoss continued to overcome the many challenges posed by the global pandemic and delivered a solid second quarter. The strength of our customer relationships is highlighted by new wins with some of our largest customers, including the 5-year renewal of our personal cloud contract with Verizon, our largest customer, that we announced this morning in a separate press release. Adjusted EBITDA margins were at the highest level since the fourth quarter of 2018, and free cash flow was $13 million. I am proud of the Synchronoss team as they remained productive and committed to servicing our customers while still working from home, and these results speak to their passion and resilience.

Three Months Ended June 30, $000s 2020 2019 % ChangeRevenues $76,535 $77,846 (1.7 %)Net Loss (10,148 ) (25,030 ) (59.5 %)Adjusted EBITDA 11,549 8,669 33.2 %

Six Months Ended June 30, $000s 2020 2019 % ChangeRevenues $153,657 $165,951 (7.4 %)Net Loss (22,423 ) (52,617 ) (57.4 %)Adjusted EBITDA 13,307 15,299 (13.0 %)

David Clark, chief financial officer, added, Our cost cutting efforts remain on track to deliver $45 million of in-year savings and $55 million of annualized savings. These efforts and execution were one of the main drivers of improved financial results including 62.6 percent adjusted gross margins, 15 percent EBITDA margin, and positive free cash flow of $13 million.

Guidance

The companys original 2020 Adjusted EBITDA guidance was $25-$35 million. The Verizon renewal reduces non-cash deferred revenue by approximately $10 million in the latter half of 2020. Under accounting standard ASC 606, this remaining $10 million of deferred revenue will now be amortized over the new term of the contract. The implied Adjusted EBITDA guidance range would be $15-$25 million. However, the company is also narrowing guidance to the top half of the range. Accordingly, the company now expects Adjusted EBITDA for the year of $20-$25 million.

New Business Update

New customer agreements and partnerships that the company has completed since the last earnings announcement include:

-- The 5-year contract extension of our personal cloud agreement with Verizon. This extension further solidifies our long-term relationship with Verizon and shows the value they see in our Cloud solution, which delivers solid incremental revenue and profitability for them, and a better user experience for their subscribers. -- This new personal cloud contract with Verizon includes a joint market agreement to more directly target their existing base of subscribers. -- We secured additional cloud initiatives in the quarter that will augment Verizons service offerings in other areas and expand our access to Verizon customers and help us continue to grow cloud revenue. -- In Advanced Messaging, we signed two additional Agreements with CCMI to expand our role in preparing for the launch of RCS-based messaging service to be offered by the joint venture between AT&T, Sprint, T-Mobile and Verizon. -- In Core Messaging, we won new business and expanded our relationship with Proximus to provide Messaging services. -- In our Digital Platform, we signed a 5-year extension to our relationship with Sage Management, who provides audit services as a complement to our Financial Analytics product. Additionally, we signed a seven-figure Financial Analytics contract with a nationwide service provider. -- Finally, we signed Globe Telecom to a Spatial Managed Services contract in the Philippines.

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 included below under the heading "Non-GAAP Financial Measures."

Conference Call Details

Synchronoss will host a conference call at 8:00 a.m. (ET) that morning to discuss the financial results. Please click the following link to join the webinar: https://synchronoss.zoom.us/j/99626412696?pwd=bDJQRlF6MjNoN3c3amJySHFKemx1dz09

Password: 015747

To join by telephone, please dial one of the following numbers based on your location:US: +1 253 215 8782+1 346 248 7799 +1 408 638 0968 +1 669 900 6833 +1 301 715 8592 +1 312 626 6799 +1 646 876 9923Webinar ID: 996 2641 2696Password: 015747

International numbers are also available: https://synchronoss.zoom.us/u/ab5P87e92z.

Following the conference call, an archived webcast of the conference call will be available on the Investor Relations section of the companys website at www.synchronoss.com.

Non-GAAP Financial MeasuresSynchronoss 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 (loss), net income (loss), effective tax rate, and earnings (loss) 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 fair value stock-based compensation expense, acquisition-related costs which includes integration costs, restructuring and cease-use lease expense, 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 transforms the way companies create new revenue, reduce costs and delight their subscribers with cloud, messaging, digital and IoT products, supporting hundreds of millions of subscribers across the globe. Synchronoss secure, scalable and groundbreaking new technologies, trusted partnerships, and talented people change the way TMT customers grow their businesses. For more information, visit us at www.synchronoss.com.

Forward-looking Statements

This press release includes statements concerning Synchronoss and its future expectations, plans and prospects that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words may, should, expects, plans, anticipates, could, intends, believes, potential or continue or other similar expressions are intended to identify forward-looking statements. Synchronoss has based these forward-looking statements largely on its current expectations and projections about future events and financial trends that it believes may affect its business, financial condition and results of operations. These forward-looking statements speak only as of the date of this press release and are subject to a number of risks, uncertainties and assumptions including, without limitation, risks relating to the Companys ability to sustain or increase revenue from its larger customers and generate revenue from new customers, the Companys expectations regarding expenses and revenue, the sufficiency of the Companys cash resources, the Companys growth strategies, the anticipated trends and challenges in the business and the market in which the Company operates, the Companys expectations regarding federal, state and foreign regulatory requirements, the pending lawsuits against the Company described in its most recent SEC filings, and other risks and factors that are described in the Risk Factors and Managements Discussion and Analysis of Financial Condition and Results of Operations sections of the Companys Annual Report on Form 10-K for the year ended December 31, 2019, which is on file with the SEC and available on the SECs website at www.sec.gov. The company does not undertake any obligation to update any forward-looking statements contained in this press release as a result of new information, future events or otherwise.

Contact:

Investors:Leslie GahaganInvestor Relations Analyst623-745-4046investor@synchronoss.com

SYNCHRONOSS TECHNOLOGIES,INC.CONDENSED CONSOLIDATED BALANCE SHEETS(Unaudited) (In thousands)

June 30, 2020 December 31, 2019Assets Cash and cash equivalents $ 42,771 $ 39,001 Accounts receivable, net 57,332 65,863 Operating lease right-of-use assets 46,913 53,965 Goodwill 222,854 222,969 Other Assets 151,782 150,225 Total assets $ 521,652 $ 532,023 Liabilities and stockholders? equity Accounts Payable and Accrued expenses $ 96,454 $ 87,538 Debt, current 10,000 ? Deferred revenues 63,273 87,799 Operating lease liabilities, non-current 53,495 60,976 Other liabilities 17,946 18,768 Preferred Stock 218,482 200,865 Stockholders? equity 62,002 76,077 Total liabilities and stockholders? equity $ 521,652 $ 532,023

SYNCHRONOSS TECHNOLOGIES,INC.CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(Unaudited)(In thousands, except per share data)

Three Months Ended June 30, Six Months Ended June 30, 2020 2019 2020 2019 Net revenues $ 76,535 $ 77,846 $ 153,657 $ 165,951 Costs and expenses:Cost of revenues 29,480 33,403 64,951 72,356 Research and 19,096 19,026 38,884 38,707 developmentSelling, generaland 24,640 23,080 50,984 52,326 administrativeRestructuring 4,493 356 5,943 777 chargesDepreciation and 10,284 20,269 21,640 40,412 amortizationTotal costs and 87,993 96,134 182,402 204,578 expensesLoss fromcontinuing (11,458 ) (18,288 ) (28,745 ) (38,627 ) operationsInterest income 1,509 299 1,568 488 Interest expense (84 ) (463 ) (329 ) (1,048 ) Gain (loss) onextinguishment ? 430 ? 817 of debtOther Income 1,367 (24 ) 3,058 439 Equity method ? (376 ) ? (1,619 ) investment lossLoss fromcontinuing (8,666 ) (18,422 ) (24,448 ) (39,550 ) operations,before taxesBenefit for 7,972 1,844 20,404 3,235 income taxesNet loss fromcontinuing (694 ) (16,578 ) (4,044 ) (36,315 ) operationsNet lossattributable toredeemable (165 ) (593 ) (182 ) (906 ) noncontrollinginterestsPreferred stock (9,289 ) (7,859 ) (18,197 ) (15,396 ) dividendNet lossattributable to $ (10,148 ) $ (25,030 ) $ (22,423 ) $ (52,617 ) Synchronoss Earnings per shareBasic (0.24 ) (0.61 ) (0.54 ) (1.30 )Diluted (0.24 ) (0.61 ) (0.54 ) (1.30 )Weighted-averagecommon shares outstanding:Basic 41,697 40,810 41,482 40,566 Diluted 41,697 40,810 41,482 40,566

SYNCHRONOSS TECHNOLOGIES,INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(In thousands) (Unaudited)

Six Months Ended June 30, 2020 2019Net loss from continuing operations $ (4,044 ) $ (36,315 ) Adjustments to reconcile net loss to net cash used in operating activities:Non-cash items 30,122 51,743 Changes in operating assets and liabilities: (24,470 ) 3,136 Net cash provided by operating activities 1,608 18,564 Investing activities: Purchases of fixed assets (424 ) (4,940 ) Purchases of intangible assets and (8,685 ) (5,959 ) capitalized softwareOther investing activities 2,175 (9,351 ) Net cash used in investing activities (6,934 ) (20,250 ) Net cash provided by (used in) financing 9,991 (73,574 ) activitiesEffect of exchange rate changes on cash (895 ) 10 Net increase (decrease) in cash and cash 3,770 (75,250 ) equivalents Cash, restricted cash and cash equivalents, 39,001 109,860 beginning of periodCash, restricted cash and cash equivalents, $ 42,771 $ 34,610 end of period

SYNCHRONOSS TECHNOLOGIES,INC.RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES(In thousands, except per share data) (Unaudited)

Three Months Ended Jun 30, Six Months Ended Jun 30, 2020 2019 2020 2019Non-GAAPfinancial measures andreconciliation:GAAP Revenue $ 76,535 $ 77,846 $ 153,657 $ 165,951 Less: Cost of 29,480 33,403 64,951 72,356 revenuesGross Profit 47,055 44,443 88,706 93,595 Add / (Less): Stock-basedcompensation 641 657 1,394 1,343 expenseRestructuring,transition, and 243 ? 283 ? cease-use leaseexpenseAdjusted Gross $ 47,939 $ 45,100 $ 90,383 $ 94,938 ProfitAdjusted Gross 62.6 % 57.9 % 58.8 % 57.2 % Margin GAAP Net lossattributable to $ (10,148 ) $ (25,030 ) $ (22,423 ) $ (52,617 ) SynchronossAdd / (Less): Stock-basedcompensation 4,987 5,474 10,156 11,028 expenseAcquisition ? (42 ) ? (230 ) costsRestructuring,transition, and 7,003 474 8,699 1,214 cease-use leaseexpenseAmortization 4,062 7,123 8,696 13,252 expenseLitigation,remediation and 733 782 1,557 1,502 refiling costsNon-GAAPExpensesattributable to ? (39 ) ? (76 ) Non-ControllingInterestNon-GAAP NetIncome (loss)from continuing $ 6,637 $ (11,258 ) $ 6,686 $ (25,927 ) operationsattributable toSynchronoss DilutedNon-GAAP NetIncome (loss) $ 0.16 $ (0.28 ) $ 0.16 $ (0.64 ) from continuingoperations pershare Weighted sharesoutstanding - 41,697 40,810 41,482 40,566 Diluted

SYNCHRONOSS TECHNOLOGIES,INC.RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES(In thousands, except per share data) (Unaudited)

Three Months Ended Six Months Ended Jun 30, 2019 Sep 30, 2019 Dec 31, 2019 Mar 31, 2020 Jun 30, 2020 Jun 30, 2020 Jun 30, 2019 Net (loss)income $ (25,030 ) $ (69,432 ) $ (14,678 ) $ (12,275 ) $ (10,148 ) $ (22,423 ) $ (52,617 ) attributableto SynchronossAdd / (Less): Stock-basedcompensation 5,474 6,000 5,222 5,169 4,987 10,156 11,028 expenseAcquisition (42 ) ? ? ? ? ? (230 ) costsRestructuring,transition, 474 6,215 17 1,696 7,003 8,699 1,214 and cease-uselease expenseCumulativeadjustment to ? 26,044 ? ? ? ? ? STI receivableLitigation,remediation 782 4 1,320 824 733 1,557 1,502 and refilingcostsDepreciationand 20,269 18,508 18,116 11,356 10,284 21,640 40,412 amortizationInterest (299 ) (228 ) (542 ) (58 ) (1,509 ) (1,567 ) (488 ) incomeInterest 463 203 104 245 84 329 1,048 ExpenseGain onExtinguishment (430 ) (5 ) ? ? ? ? (817 ) of debtOther (Income) 24 422 (7,372 ) (1,692 ) (1,367 ) (3,059 ) (439 ) expense, netEquity methodinvestment 376 ? ? ? ? ? 1,619 lossProvision(benefit) for (1,844 ) 9,849 (4,439 ) (12,432 ) (7,972 ) (20,404 ) (3,235 ) income taxesNet (loss)incomeattributable 593 25 194 17 165 182 906 tononcontrollinginterestsPreferred 7,859 8,194 8,544 8,908 9,289 18,197 15,396 dividendAdjustedEBITDA $ 8,669 $ 5,799 $ 6,486 $ 1,758 $ 11,549 $ 13,307 $ 15,299 (non-GAAP)

Three Months Ended June 30, Six Months Ended June 30, 2020 2019 2020 2019 Net Cash(used in)provided by $ 16,624 $ 24,248 $ 1,608 $ 18,564 operatingactivitiesAdd / (Less):Capitalized (4,257 ) (3,255 ) (8,685 ) (5,959 ) softwarePropertyand (175 ) (2,313 ) (424 ) (4,940 ) equipmentFree $ 12,192 $ 18,680 $ (7,501 ) $ 7,665 CashflowAdd:Litigation,remediation 733 782 1,557 1,502 andrefilingcostsAdjustedFree $ 12,925 $ 19,462 $ (5,944 ) $ 9,167 Cashflow