Synchronoss Technologies, Inc. Announces Fourth Quarter and Full Year 2012 Financial Results

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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

BRIDGEWATER, N.J.--(BUSINESS WIRE)-- Synchronoss Technologies, Inc. (NAS: 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 (NAS: 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,
20122011
 
ASSETS
Current assets:
Cash and cash equivalents$36,028$69,430
Marketable securities20,18851,504

Accounts receivable, net of allowance for doubtful accounts of $258 and $356 at December 31, 2012 and 2011, respectively

77,56557,387
Prepaid expenses and other assets19,00916,061
Deferred tax assets 4,114  3,938 
 
Total current assets156,904198,320
Marketable securities65331,642
Property and equipment, net58,16234,969
Goodwill115,51754,617
Intangible assets, net110,76063,969
Deferred tax assets6,96112,606
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 expenses37,06924,153
Deferred revenues11,3208,834
Contingent consideration obligation 3,279  4,735 
 
Total current liabilities60,64845,434
Lease financing obligation - long term9,5409,241
Contingent consideration obligation - long-term5,1008,432
Other liabilities2,494948
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
  issued; 38,674 and 38,394 outstanding at December 31, 2012 and 2011, respectively

44
Treasury stock, at cost (3,859 and 2,669 shares at December 31, 2012 and 2011, respectively(67,918)(43,712)
Additional paid-in capital344,469307,586
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 December 31,Twelve Months Ended December 31,
 
2012201120122011
 
 
Net revenues$73,181$62,151$273,692$229,084
Costs and expenses:
Cost of services (2)(3)(4)*31,28228,325115,670106,595
Research and development (2)(3)(4)14,21610,50452,30741,541
Selling, general and administrative (2)(3)(4)14,95212,97346,68044,886
Net change in contingent consideration obligation(500)(357)(6,235)2,954
Depreciation and amortization 6,611  3,710  23,812  14,739 
 
Total costs and expenses 66,561  55,155  232,234  210,715 
 
Income from operations6,6206,99641,45818,369
Interest income2923491,315821
Interest expense(296)(255)(998)(928)
Other income (expense) (5) 303  (43) 889  97 
 
Income before income tax expense6,9197,04742,66418,359
Income tax expense (benefit) (3,470) 1,161  (15,581) (3,233)
 
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 consideration obligation, net of tax -  -  -  1,466 
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