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

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,

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 December 31, 2012 and 2011, respectively

77,565

57,387

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 - long-term

5,100

8,432

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
issued; 38,674 and 38,394 outstanding at December 31, 2012 and 2011, respectively

4

4

Treasury stock, at cost (3,859 and 2,669 shares at December 31, 2012 and 2011, respectively

(67,918

)

(43,712

)

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 December 31,

Twelve Months Ended December 31,

2012

2011

2012

2011

Net revenues

$

73,181

$

62,151

$

273,692

$

229,084

Costs and expenses:

Cost of services (2)(3)(4)*

31,282

28,325

115,670

106,595

Research and development (2)(3)(4)

14,216

10,504

52,307

41,541

Selling, general and administrative (2)(3)(4)

14,952

12,973

46,680

44,886

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 operations

6,620

6,996

41,458

18,369

Interest income

292

349

1,315

821

Interest expense

(296

)

(255

)

(998

)

(928

)

Other income (expense) (5)

303

(43

)

889

97

Income before income tax expense

6,919

7,047

42,664

18,359

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