BRIDGEWATER, N.J.--(BUSINESS WIRE)--Synchronoss Technologies, Inc. (NASDAQ: SNCR), the world’s leading provider of transaction management, cloud enablement and connectivity services for connected devices, today announced financial results for the fourth quarter and full year of 2011.
“The fourth quarter was highlighted by revenue and profitability that exceeded our expectations, and it was a strong finish to a record year for Synchronoss,” said Stephen G. Waldis, Founder and Chief Executive Officer of Synchronoss. “We experienced strong transaction volumes related to smartphones and connected devices which led to increased automation rates and much stronger than expected profitability. The fourth quarter provided evidence of the operating leverage created by our connect-synch-activate strategy, and we believe it positions us well to scale our business model as we focus on expanding our on-device presence to hundreds of millions of connected devices in the years ahead.”
For the fourth quarter of 2011, Synchronoss reported net revenues of $62.2 million on a GAAP basis, representing an increase of 26% compared to the fourth quarter of 2010. Gross profit was $33.8 million and income from operations was $7.0 million in the fourth quarter of 2011. GAAP net income applicable to common stock was $8.2 million, leading to GAAP diluted earnings per share of $0.21, compared to a GAAP net loss per share of ($0.09) for the fourth quarter of 2010.
Synchronoss reported non-GAAP net revenues, which adds back the purchase accounting adjustment related to FusionOne’s revenues, of $62.3 million, an increase of 22% compared to the fourth quarter of 2010. Non-GAAP gross profit for the fourth quarter of 2011 was $35.4 million, representing a gross margin of 56.8%. Non-GAAP income from operations was $15.9 million in the fourth quarter of 2011, representing a year-over-year increase of 38% and an operating margin of 25.5%. Non-GAAP net income was $13.3 million in the fourth quarter of 2011, leading to diluted earnings per share of $0.34, an increase compared to $0.21 for the fourth quarter of 2010. Non-GAAP diluted earnings per share for the fourth quarter of 2011 was $0.11 above the high end of company guidance, with $0.06 due to a lower than expected tax rate and $0.05 driven by the combination of higher revenue, higher automation rates and prudent expense management.
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."
Lawrence R. Irving, Chief Financial Officer and Treasurer, said “Synchronoss delivered meaningful improvement in gross margins during 2011. While there is an upfront cost associated with the continued build out of our ConvergenceNow® Plus+ platform, we believe that there is an upward bias to our long-term gross margin as we leverage our growing on-device presence to deliver an increasing number of highly automated, cloud-based services.”
Other Fourth Quarter and Recent Business Highlights:
- Business outside of the AT&T relationship accounted for approximately $29.8 million of non-GAAP revenue, representing approximately 48% 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 $32.5 million of non-GAAP revenue, representing the other 52% of total revenue.
- Acquired privately-held Miyowa S.A. during December 2011. As a leading provider of social network and messaging software for mobile devices, Miyowa integrates well with Synchronoss’ ConvergenceNow® Plus+™ strategy by incorporating the network address book with social networking. Miyowa also expands our presence in Europe to help manage and drive anticipated growth in that region of the world with Vodafone, Orange and other customers.
- Announced that Robert Garcia was promoted from Chief Operating Officer to President, where he is responsible for the company’s day to day business and operating plans. David Berry re-joined Synchronoss in the position of Chief Innovation Officer, where he is focused on further developing the Synchronoss brand and product portfolio assisting in global growth and innovation. Karen Rosenberger was promoted to Senior Vice President of Finance and Chief Accounting Officer, following her role as the company’s Vice President of Finance and Controller. Andrew Wilmott was promoted to Senior Vice President of Service Delivery and General Manager, following his role as the company’s Vice President and General Manager, Service Delivery.
Full Year 2011 Summary Financial Results
On a GAAP basis, revenues for the full year 2011 were $229.1 million, an increase of 38% compared to $166.0 million in the prior year. Gross profit was $122.5 million for 2011. Income from operations was $18.4 million and net income was $15.1 million, leading to 2011 diluted earnings per share of $0.43.
On a Non-GAAP basis, revenues for 2011 were $230.5 million, an increase of 35% compared to $170.2 million in the prior year. Gross profit for 2011 was $129.3 million, and gross margin was 56.1%, an increase from 53.6% for 2010. Income from operations was $52.7 million for 2011, an increase of 44% compared to 2010. Operating margin for 2011 was 22.9%, an increase from 21.6% for 2010. Net income was $38.0 million for 2011, leading to diluted earnings per share of $0.98, an increase of 40% from $0.70 in the prior year.
Conference Call Details
In conjunction with this announcement, Synchronoss will host a conference call on Tuesday, February 7, 2012, at 4:30 p.m. (ET) to discuss the company's financial results. To access this call, dial 866-730-5768 (domestic) or 857-350-1592 (international). The pass code for the call is 69156099. 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 97901267. 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 FusionOne acquisition, 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 world’s leading provider of transaction management, cloud enablement and connectivity services for connected devices. The company’s technology platforms ensure a simple and seamless on-demand channel for service providers and their customers. 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, 2010 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,
2011 |
December 31,
2010 |
|||||||||
ASSETS | ||||||||||
Current assets: | ||||||||||
Cash and cash equivalents | $ | 69,430 | $ | 180,367 | ||||||
Marketable securities | 51,504 | 1,766 | ||||||||
Accounts receivable, net of allowance for doubtful accounts of
$356 and $558
|
57,387 | 34,940 | ||||||||
Prepaid expenses and other assets | 16,061 | 8,606 | ||||||||
Deferred tax assets | 3,938 | 3,272 | ||||||||
Total current assets | 198,320 | 228,951 | ||||||||
Marketable securities | 31,642 | 7,502 | ||||||||
Property and equipment, net | 34,969 | 32,622 | ||||||||
Goodwill | 54,617 | 19,063 | ||||||||
Intangible assets, net | 63,969 | 33,231 | ||||||||
Deferred tax assets | 12,606 | 16,432 | ||||||||
Other assets | 2,495 | 2,598 | ||||||||
Total assets | $ | 398,618 | $ | 340,399 | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||
Current liabilities: | ||||||||||
Accounts payable | $ | 7,712 | $ | 7,013 | ||||||
Accrued expenses | 24,153 | 12,999 | ||||||||
Deferred revenues | 8,834 | 5,143 | ||||||||
Contingent consideration obligation | 4,735 | — | ||||||||
Total current liabilities | 45,434 | 25,155 | ||||||||
Lease financing obligation - long term | 9,241 | 9,205 | ||||||||
Contingent consideration obligation - long-term | 8,432 | 16,915 | ||||||||
Other liabilities | 948 | 1,101 | ||||||||
Stockholders’ equity: | ||||||||||
Preferred stock, $0.0001 par value; 10,000 shares authorized, 0
shares issued and |
— | — | ||||||||
Common stock, $0.0001 par value; 100,000 shares authorized, 41,063
and 38,863 shares |
4 | 4 | ||||||||
Treasury stock, at cost (2,669 and 2,000 shares at December 31, 2011 and 2010, respectively) | (43,712 | ) | (23,713 | ) | ||||||
Additional paid-in capital | 307,586 | 255,656 | ||||||||
Accumulated other comprehensive loss | (699 | ) | (182 | ) | ||||||
Retained earnings | 71,384 | 56,258 | ||||||||
Total stockholders’ equity | 334,563 | 288,023 | ||||||||
Total liabilities and stockholders’ equity | $ | 398,618 | $ | 340,399 |
SYNCHRONOSS TECHNOLOGIES, INC. | |||||||||||||||||||||||
STATEMENT OF INCOME | |||||||||||||||||||||||
(in thousands, except per share data) | |||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||
Three Months Ended December 31, |
Twelve Months Ended December 31, |
||||||||||||||||||||||
2011 | 2010 | 2011 | 2010 | ||||||||||||||||||||
Net revenues | $ | 62,151 | $ | 49,232 | $ | 229,084 | $ | 165,969 | |||||||||||||||
Costs and expenses: | |||||||||||||||||||||||
Cost of services (2)(3)(4)* | 28,325 | 23,579 | 106,595 | 83,217 | |||||||||||||||||||
Research and development (2)(3)(4) | 10,504 | 9,248 | 41,541 | 26,008 | |||||||||||||||||||
Selling, general and administrative (2)(3)(4) | 12,973 | 10,433 | 44,886 | 33,743 | |||||||||||||||||||
Net change in contingent consideration obligation | (357 | ) | 6,263 | 2,954 | 4,295 | ||||||||||||||||||
Depreciation and amortization | 3,710 | 2,945 | 14,739 | 9,403 | |||||||||||||||||||
Total costs and expenses | 55,155 | 52,468 | 210,715 | 156,666 | |||||||||||||||||||
Income (loss) from operations | 6,996 | (3,236 | ) | 18,369 | 9,303 | ||||||||||||||||||
Interest and other income | 896 | 118 | 1,810 | 1,058 | |||||||||||||||||||
Interest and other expense | (845 | ) | (355 | ) | (1,820 | ) | (1,264 | ) | |||||||||||||||
Income (loss) before income tax expense | 7,047 | (3,473 | ) | 18,359 | 9,097 | ||||||||||||||||||
Income tax benefit (expense) | 1,161 | (481 | ) | (3,233 | ) | (5,223 | ) | ||||||||||||||||
Net income (loss) | $ | 8,208 | $ | (3,954 | ) | $ | 15,126 | $ | 3,874 | ||||||||||||||
Net income (loss) per common share: | |||||||||||||||||||||||
Basic (1) | $ | 0.22 | $ | (0.09 | ) | $ | 0.44 | $ | 0.12 | ||||||||||||||
Diluted (1) | $ | 0.21 | $ | (0.09 | ) | $ | 0.43 | $ | 0.12 | ||||||||||||||
Weighted-average common shares outstanding: | |||||||||||||||||||||||
Basic |
|
37,683 | 34,048 | 37,372 | 31,971 | ||||||||||||||||||
Diluted | 38,755 | 34,048 | 38,619 | 33,011 | |||||||||||||||||||
* Cost of services excludes depreciation which is shown separately. | |||||||||||||||||||||||
(1) Adjustment to net income (loss) for equity mark-to-market on contingent consideration obligation: | |||||||||||||||||||||||
Net income (loss) | $ | 8,208 | $ | (3,954 | ) | $ | 15,126 | $ | 3,874 | ||||||||||||||
Income effect for equity mark-to-market on contingent consideration obligation, net of tax | - | 864 | 1,466 | (10 | ) | ||||||||||||||||||
Net income (loss) applicable to shares of common stock for earnings per share | $ | 8,208 | $ | (3,090 | ) | $ | 16,592 | $ | 3,864 | ||||||||||||||
(2) Amounts include fair value stock-based compensation as follows: | |||||||||||||||||||||||
Cost of services | $ | 1,308 | $ | 1,238 | $ | 4,981 | $ | 4,057 | |||||||||||||||
Research and development | 1,579 | 619 | 4,510 | 1,950 | |||||||||||||||||||
Selling, general and administrative | 2,725 | 2,351 | 11,236 | 6,965 | |||||||||||||||||||
Total fair value stock-based compensation expense | $ | 5,612 | $ | 4,208 | $ | 20,727 | $ | 12,972 | |||||||||||||||
(3) Amounts include acquisition and restructuring costs as follows: | |||||||||||||||||||||||
Cost of services | $ | - | $ | - | $ | 15 | $ | - | |||||||||||||||
Research and development | - | 211 | 253 | 344 | |||||||||||||||||||
Selling, general and administrative | 2,149 | 278 | 2,491 | 3,196 | |||||||||||||||||||
Total acquisition and restructuring costs | $ | 2,149 | $ | 489 | $ | 2,759 | $ | 3,540 | |||||||||||||||
(4) Amounts include fair value earn-out cash and stock compensation as follows: | |||||||||||||||||||||||
Cost of services | $ | 82 | $ | 77 | $ | 432 | $ | 81 | |||||||||||||||
Research and development | 264 | 577 | 1,023 | 606 | |||||||||||||||||||
Selling, general and administrative | 303 | 455 | 2,448 | 477 | |||||||||||||||||||
Total fair value earn-out cash and stock compensation expense | $ | 649 | $ | 1,109 | $ | 3,903 | $ | 1,164 | |||||||||||||||
SYNCHRONOSS TECHNOLOGIES, INC. | |||||||||||||||||||||||
Reconciliation of GAAP to Non-GAAP Financial Measures | |||||||||||||||||||||||
(in thousands, except per share data) | |||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||
Three Months Ended December 31, |
Twelve Months Ended December 31, |
||||||||||||||||||||||
2011 | 2010 | 2011 | 2010 | ||||||||||||||||||||
Non-GAAP financial measures and reconciliation: | |||||||||||||||||||||||
GAAP Revenue | $ | 62,151 | $ | 49,232 | $ | 229,084 | $ | 165,969 | |||||||||||||||
Add: Deferred Revenue Write-Down | 150 | 1,968 | 1,387 | 4,277 | |||||||||||||||||||
Non-GAAP Revenue | $ | 62,301 | $ | 51,200 | $ | 230,471 | $ | 170,246 | |||||||||||||||
GAAP Revenue | $ | 62,151 | $ | 49,232 | $ | 229,084 | $ | 165,969 | |||||||||||||||
Less: Cost of Services | 28,325 | 23,579 | 106,595 | 83,217 | |||||||||||||||||||
GAAP Gross Margin | 33,826 | 25,653 | 122,489 | 82,752 | |||||||||||||||||||
Add: Deferred revenue write-down | 150 | 1,968 | 1,387 | 4,277 | |||||||||||||||||||
Add: Fair value stock-based compensation | 1,308 | 1,238 | 4,981 | 4,057 | |||||||||||||||||||
Add: Acquisition and restructuring costs | - | - | 15 | - | |||||||||||||||||||
Add: Deferred compensation expense - earn-out | 82 | 77 | 432 | 81 | |||||||||||||||||||
Non-GAAP Gross Margin | $ | 35,366 | $ | 28,936 | $ | 129,304 | $ | 91,167 | |||||||||||||||
Non-GAAP Gross Margin % | 57 | % | 57 | % | 56 | % | 54 | % | |||||||||||||||
GAAP income (loss) from operations | $ | 6,996 | $ | (3,236 | ) | $ | 18,369 | $ | 9,303 | ||||||||||||||
Add: Deferred revenue write-down | 150 | 1,968 | 1,387 | 4,277 | |||||||||||||||||||
Add: Fair value stock-based compensation | 5,612 | 4,208 | 20,727 | 12,972 | |||||||||||||||||||
Add: Acquisition and restructuring costs | 2,149 | 489 | 2,759 | 3,540 | |||||||||||||||||||
Add: Net change in contingent consideration obligation | (357 | ) | 6,263 | 2,954 | 4,295 | ||||||||||||||||||
Add: Deferred compensation expense - earn-out | 649 | 1,109 | 3,903 | 1,164 | |||||||||||||||||||
Add: Amortization expense | 660 | 660 | 2,640 | 1,185 | |||||||||||||||||||
Non-GAAP income from operations | $ | 15,859 | $ | 11,461 | $ | 52,739 | $ | 36,736 | |||||||||||||||
Non-GAAP income from operations % | 25 | % | 22 | % | 23 | % | 22 | % | |||||||||||||||
GAAP net income (loss) attributable to common stockholders | $ | 8,208 | $ | (3,954 | ) | $ | 15,126 | $ | 3,874 | ||||||||||||||
Add: Deferred revenue write-down, net of tax | 61 | 1,555 | 922 | 2,987 | |||||||||||||||||||
Add: Fair value stock-based compensation, net of tax | 3,253 | 3,625 | 13,773 | 9,058 | |||||||||||||||||||
Add: Acquisition and restructuring costs, net of taxes | 1,409 | 580 | 1,833 | 2,472 | |||||||||||||||||||
Add: Net change in contingent consideration obligation, net of tax | (341 | ) | 4,219 | 1,963 | 2,999 | ||||||||||||||||||
Add: Deferred compensation expense - earn-out, net of tax | 330 | 779 | 2,594 | 813 | |||||||||||||||||||
Add: Amortization expense, net of tax | 376 | 502 | 1,754 | 827 | |||||||||||||||||||
Non-GAAP net income | $ | 13,296 | $ | 7,306 | $ | 37,965 | $ | 23,030 | |||||||||||||||
Diluted non-GAAP net income per share | $ | 0.34 | $ | 0.21 | $ | 0.98 | $ | 0.70 | |||||||||||||||
Weighted shares outstanding - Diluted | 38,755 | 35,571 | 38,619 | 33,011 |
SYNCHRONOSS TECHNOLOGIES, INC. | ||||||||||||
STATEMENT OF CASH FLOWS | ||||||||||||
(in thousands) | ||||||||||||
(Unaudited) | ||||||||||||
Twelve Months Ended December 31, | ||||||||||||
2011 | 2010 | |||||||||||
Operating activities: | ||||||||||||
Net income | $ | 15,126 | $ | 3,874 | ||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Depreciation and amortization expense | 14,739 | 9,403 | ||||||||||
Loss on disposal of fixed assets | — | 94 | ||||||||||
Proceeds from insurance claim | 622 | — | ||||||||||
Amortization of bond premium | (199 | ) | (418 | ) | ||||||||
Deferred income taxes | (642 | ) | 69 | |||||||||
Non-cash interest on leased facility | 918 | 913 | ||||||||||
Stock-based compensation | 22,051 | 13,637 | ||||||||||
Changes in operating assets and liabilities: | - | |||||||||||
Accounts receivable, net of allowance for doubtful accounts | (19,409 | ) | (8,740 | ) | ||||||||
Prepaid expenses and other current assets | 597 | (1,927 | ) | |||||||||
Other assets | (349 | ) | (1,695 | ) | ||||||||
Accounts payable and accrued expenses | 7,695 | 5,678 | ||||||||||
Contingent consideration obligation | 2,188 | 4,795 | ||||||||||
Excess tax benefit from the exercise of stock options | (3,575 | ) | (2,361 | ) | ||||||||
Other liabilities | (183 | ) | (228 | ) | ||||||||
Deferred revenues | 3,006 | (1,352 | ) | |||||||||
Net cash provided by operating activities | 42,585 | 21,742 | ||||||||||
Investing activities: | ||||||||||||
Purchases of fixed assets | (14,732 | ) | (15,423 | ) | ||||||||
Proceeds from the sale of fixed assets | — | 55 | ||||||||||
Proceeds from insurance claim | 199 | 418 | ||||||||||
Purchases of marketable securities available-for-sale | (82,098 | ) | (4,723 | ) | ||||||||
Maturity of marketable securities available-for-sale | 7,259 | 3,230 | ||||||||||
Business acquired, net of cash | (55,752 | ) | (30,779 | ) | ||||||||
Net cash used in investing activities | (145,124 | ) | (47,222 | ) | ||||||||
Financing activities: | ||||||||||||
Proceeds from the exercise of stock options | 17,707 | 8,090 | ||||||||||
Payments on contingent consideration | (8,533 | ) | — | |||||||||
Proceeds from secondary public offering, net of offering costs | — | 106,637 | ||||||||||
Excess tax benefit from the exercise of stock options | 3,576 | 2,361 | ||||||||||
Repurchase of common stock | (19,999 | ) | — | |||||||||
Payments on capital obligations | (945 | ) | (949 | ) | ||||||||
Net cash (used in) provided by financing activities | (8,194 | ) | 116,139 | |||||||||
Effect of exchange rate changes on cash | (204 | ) | (216 | ) | ||||||||
Net decrease in cash and cash equivalents | (110,937 | ) | 90,443 | |||||||||
Cash and cash equivalents at beginning of year | 180,367 | 89,924 | ||||||||||
Cash and cash equivalents at end of period | $ | 69,430 | $ | 180,367 | ||||||||
SYNCHRONOSS TECHNOLOGIES, INC. | ||||||||||||
Reconciliation of GAAP to Non-GAAP Cash Provided by Operating Activities | ||||||||||||
(in thousands) | ||||||||||||
(Unaudited) | ||||||||||||
Twelve Months Ended December 31, | ||||||||||||
2011 | 2010 | |||||||||||
Non-GAAP cash provided by operating activities and reconciliation: | ||||||||||||
Net cash provided by operating activities (GAAP) | $ | 42,585 | $ | 21,742 | ||||||||
Add: Tax benefits from stock options exercised | 3,575 | 2,361 | ||||||||||
Add: Cash payments on settlement of Earn-out | 3,026 | — | ||||||||||
Adjusted cash flow provided by operating activities (Non-GAAP) | $ | 49,186 | $ | 24,103 |