Synchronoss Technologies(SNCR) - 2025 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION This section provides the unaudited condensed consolidated financial statements and related notes for Synchronoss Technologies, Inc Item 1. Condensed Consolidated Financial Statements and Notes This section presents the unaudited condensed consolidated financial statements of Synchronoss Technologies, Inc. for the three months ended March 31, 2025, and 2024, along with detailed notes explaining the Company's business, accounting policies, revenue disaggregation, segment information, debt, equity, and other financial commitments Condensed Consolidated Balance Sheets (unaudited) This statement provides a snapshot of the company's financial position, detailing assets, liabilities, and equity at specific points in time - Total assets decreased slightly from $293,825 thousand at December 31, 2024, to $293,336 thousand at March 31, 2025[8] - Total liabilities decreased from $251,550 thousand to $245,398 thousand, while total stockholders' equity increased from $29,775 thousand to $35,438 thousand[8] Condensed Consolidated Balance Sheets (in thousands) | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | | :----------------------------- | :----------------------------- | :----------------------------- | :-------------------- | | Total assets | $293,336 | $293,825 | $(489) | | Total liabilities | $245,398 | $251,550 | $(6,152) | | Total stockholders' equity | $35,438 | $29,775 | $5,663 | | Cash and cash equivalents | $29,138 | $33,375 | $(4,237) | | Goodwill | $182,378 | $179,408 | $2,970 | | Long-term debt, net | $185,166 | $184,840 | $326 | Condensed Consolidated Statements of Operations (unaudited) This statement presents the company's revenues, expenses, and net income or loss over a specific period, highlighting operational performance - Net revenues decreased by $752 thousand (1.75%) year-over-year (YoY)[10] - Net loss attributable to Synchronoss was $3,817 thousand for Q1 2025, a significant decline from net income of $2,341 thousand in Q1 2024[10] - Interest expense increased by $1,905 thousand (54.17%) YoY, primarily due to the new Term Loan, and other (expense) income, net, shifted from an income of $3,811 thousand in Q1 2024 to an expense of $5,579 thousand in Q1 2025, mainly due to foreign exchange losses[10] Condensed Consolidated Statements of Operations (in thousands, except EPS) | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | Change (in thousands) | YoY Change (%) | | :------------------------------------ | :------------------------------------ | :------------------------------------ | :-------------------- | :------------- | | Net revenues | $42,213 | $42,965 | $(752) | -1.75% | | Total costs and expenses | $33,984 | $38,389 | $(4,405) | -11.47% | | Income from operations | $8,229 | $4,576 | $3,653 | 79.83% | | Interest expense | $(5,422) | $(3,517) | $(1,905) | 54.17% | | Other (expense) income, net | $(5,579) | $3,811 | $(9,390) | -246.39% | | Net (loss) income attributable to Synchronoss | $(3,817) | $2,341 | $(6,158) | -263.05% | | Basic EPS | $(0.37) | $0.24 | $(0.61) | -254.17% | Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited) This statement details the company's comprehensive income or loss, including net income and other comprehensive income items not recognized in net income - Comprehensive income attributable to Synchronoss was $5,036 thousand for Q1 2025, a significant improvement from a loss of $1,639 thousand in Q1 2024[14] - This improvement was primarily driven by a positive foreign currency translation adjustment of $8,853 thousand in Q1 2025, compared to a loss of $6,109 thousand in Q1 2024[14] Condensed Consolidated Statements of Comprehensive Income (Loss) (in thousands) | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | Change (in thousands) | | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | :-------------------- | | Net (loss) income | $(3,817) | $4,475 | $(8,292) | | Foreign currency translation adjustments | $8,853 | $(6,109) | $14,962 | | Comprehensive income (loss) attributable to Synchronoss | $5,036 | $(1,639) | $6,675 | Condensed Consolidated Statements of Stockholders' Equity (unaudited) This statement outlines changes in the company's equity accounts, including common stock, additional paid-in capital, and accumulated deficit - Total stockholders' equity increased from $29,775 thousand at December 31, 2024, to $35,438 thousand at March 31, 2025[15] - This increase was mainly due to total other comprehensive income of $8,853 thousand, partially offset by a net loss of $3,817 thousand[15] Condensed Consolidated Statements of Stockholders' Equity (in thousands) | Metric | Balance at March 31, 2025 (in thousands) | Balance at December 31, 2024 (in thousands) | Change (in thousands) | | :----------------------------- | :----------------------------- | :----------------------------- | :-------------------- | | Total Stockholders' Equity | $35,438 | $29,775 | $5,663 | | Additional Paid-In Capital | $496,533 | $495,906 | $627 | | Accumulated Other Comprehensive (Loss) Income | $(32,284) | $(41,137) | $8,853 | | Accumulated Deficit | $(428,812) | $(424,995) | $(3,817) | Condensed Consolidated Statements of Cash Flows (unaudited) This statement reports the cash generated and used by the company across operating, investing, and financing activities over a period - Net cash provided by operating activities decreased from $527 thousand in Q1 2024 to $293 thousand in Q1 2025[18] - Net cash used in investing activities decreased from $3,803 thousand in Q1 2024 to $3,310 thousand in Q1 2025, primarily due to lower additions to capitalized software[18] - Net cash used in financing activities decreased from $2,129 thousand in Q1 2024 to $1,278 thousand in Q1 2025, mainly due to the absence of preferred stock dividend payments in 2025[18] Condensed Consolidated Statements of Cash Flows (in thousands) | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | Change (in thousands) | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------- | | Net cash provided by operating activities | $293 | $527 | $(234) | | Net cash used in investing activities | $(3,310) | $(3,803) | $493 | | Net cash used in financing activities | $(1,278) | $(2,129) | $851 | | Net decrease in cash and cash equivalents | $(4,237) | $(5,472) | $1,235 | | Ending cash and cash equivalents | $29,138 | $19,100 | $10,038 | Notes to Condensed Consolidated Financial Statements (unaudited) This section provides detailed explanations and additional information supporting the condensed consolidated financial statements Note 1. Description of Business This note describes Synchronoss Technologies, Inc.'s core business as a provider of white label cloud software and services - Synchronoss Technologies, Inc. is a leading provider of white label cloud software and services that enable customers to keep subscribers, systems, networks, and content in sync[20] - The Synchronoss Personal Cloud platform is a secure and highly scalable white label platform designed for smartphones, tablets, and desktops across all operating systems, helping operator customers increase average revenue per user (ARPU) and reduce churn[21] Note 2. Basis of Presentation and Consolidation This note details the accounting principles, consolidation policies, and recent accounting standard adoptions impacting the financial statements - The interim unaudited condensed consolidated financial statements include all adjustments necessary for fair presentation and should be read in conjunction with the Company's audited consolidated financial statements in its Annual Report on Form 10-K for the year ended December 31, 2024[22] - The Company adopted ASU 2024-01 (Compensation—Stock Compensation) on January 1, 2025, which did not have a material impact on its consolidated financial position or results of operations[26] - The Company is currently evaluating ASU 2024-03 (Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures) and ASU 2023-09 (Income Taxes), neither of which is anticipated to have a material impact upon adoption[27] Note 3. Revenue This note disaggregates revenue by service type and geographic region, detailing changes and remaining performance obligations - Total revenue decreased by $752 thousand (1.75%) YoY to $42,213 thousand for Q1 2025[29] - Professional Services revenue decreased by $1,046 thousand (27.72%) YoY, while Subscription Services revenue slightly increased by $149 thousand (0.38%) YoY[29] - As of March 31, 2025, the aggregate amount of transaction price allocated to remaining performance obligations was $149.3 million, with approximately 88.8% expected to be recognized as revenues within 2 years[38] Revenue Disaggregation (in thousands) | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | Change (in thousands) | YoY Change (%) | | :-------------------- | :------------------------------------ | :------------------------------------ | :-------------------- | :------------- | | Total revenue | $42,213 | $42,965 | $(752) | -1.75% | | North America revenue | $40,355 | $39,641 | $714 | 1.80% | | APAC revenue | $1,506 | $1,548 | $(42) | -2.71% | | EMEA revenue | $352 | $1,776 | $(1,424) | -80.18% | | Professional Services | $2,727 | $3,773 | $(1,046) | -27.72% | | Subscription Services | $39,292 | $39,143 | $149 | 0.38% | | License | $194 | $49 | $145 | 295.92% | Note 4. Segments This note clarifies the company's single reportable segment structure and its revenue derivation from cloud products - The Company operates as a single reportable segment, managed and assessed by the Chief Executive Officer (CODM) based on consolidated results[40] - The segment derives revenues from cloud products under software-as-a-service arrangements[41] - Segment net loss was $3,817 thousand for Q1 2025, compared to net income of $4,475 thousand for Q1 2024[44] Segment Information (in thousands) | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | Change (in thousands) | | :-------------------------- | :------------------------------------ | :------------------------------------ | :-------------------- | | Net revenues | $42,213 | $42,965 | $(752) | | Other segment items | $8,506 | $1,143 | $7,363 | | Segment net (loss) income | $(3,817) | $4,475 | $(8,292) | Note 5. Accounts Receivable Securitization Facility This note describes the company's $15 million accounts receivable securitization facility and its utilization - The Company has a $15 million accounts receivable securitization facility (A/R Facility) with Norddeutsche Landesbank Girozentrale, set to expire on June 23, 2025[45][50] - The Company did not draw on the A/R Facility for the three months ended March 31, 2025, but drew $3.0 million on April 21, 2025, which remained unrepaid as of the filing date[51][52] - As of March 31, 2025, approximately $2.3 million of the Company's receivables were held by SN Technologies, and $1.3 million was available for draw under the A/R Facility[51] Note 6. Fair Value Measurements This note outlines the company's fair value measurements, primarily for money market accounts and performance-based cash units - The Company's fair value measurements primarily consist of Level 1 assets (money market accounts) and Level 2 liabilities (performance-based cash units)[53][54] - Money market accounts increased from $9,552 thousand at December 31, 2024, to $12,110 thousand at March 31, 2025[54] - Performance-based cash units (liabilities) increased from $948 thousand to $1,643 thousand over the same period[54] Fair Value Measurements (in thousands) | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------- | :----------------------------- | :----------------------------- | | Money market accounts (Level 1) | $12,110 | $9,552 | | Performance-based cash units (Level 2) | $1,643 | $948 | Note 7. Note Receivable This note details the amendment of a promissory note and its impact on the company's financial statements - In Q1 2024, the Company amended a promissory note with Sequential Technology International, LLC (STIN) and AP Capital Holdings II, LLC (APC), reducing the principal balance to $3.0 million and extending the maturity date to September 2027[57] - On January 8, 2025, a further Amended and Restated Settlement Agreement resulted in the Company receiving $1.6 million in past-due rent and contingent consideration[58][59] - Due to a full allowance for credit losses recorded against the Note in 2023, the modification of terms in 2025 had no net impact on the consolidated financial statements for the period ended March 31, 2025[59] Note 8. Leases This note provides information on the company's operating and finance lease liabilities, costs, and remaining lease terms - Total operating lease liabilities decreased from $22,330 thousand at December 31, 2024, to $20,970 thousand at March 31, 2025, while total finance lease liabilities increased from $1,178 thousand to $1,441 thousand[62] - Net lease cost shifted from an expense of $741 thousand in Q1 2024 to an income of $(839) thousand in Q1 2025, primarily due to the receipt of a $1.6 million past-due sublease payment[63] - The weighted-average remaining lease term for operating leases was 3.3 years (3.7 years at Dec 31, 2024) and for finance leases was 2.1 years (2.0 years at Dec 31, 2024)[65] Lease Liabilities and Costs (in thousands) | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------- | :----------------------------- | :----------------------------- | | Total operating lease liabilities | $20,970 | $22,330 | | Total finance lease liabilities | $1,441 | $1,178 | | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :-------------------------- | :------------------------------------ | :------------------------------------ | | Total net lease cost | $(839) | $741 | | Sublease income | $(2,452) | $(1,019) | Note 9. Debt This note details the company's debt structure, including the Term Loan facility, Senior Notes, and associated interest expenses - The Company entered into a $75.0 million Term Loan facility on June 28, 2024, maturing on June 28, 2028, bearing interest at Adjusted Term SOFR + 5.50% (2.50% floor)[66][67][68] - On June 28, 2024, the Company repurchased all outstanding Series B Preferred Stock and 14% of its Senior Notes using Term Loan proceeds and deferred consideration[74] - Total carrying value of debt was $187,041 thousand at March 31, 2025, and total interest expense increased by $1.9 million YoY, primarily due to $1.8 million interest from the new Term Loan[85][89] Debt Carrying Value and Interest Expense (in thousands) | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------- | :----------------------------- | :----------------------------- | | Carrying value of Senior Notes | $119,173 | $118,762 | | Carrying value of Term Loan | $67,868 | $67,953 | | Total carrying value of debt | $187,041 | $186,715 | | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :-------------------------- | :------------------------------------ | :------------------------------------ | | Total interest expense | $5,422 | $3,517 | Note 10. Accumulated Other Comprehensive Income This note explains changes in accumulated other comprehensive income, primarily driven by foreign currency translation adjustments - Accumulated other comprehensive loss improved from $(41,137) thousand at December 31, 2024, to $(32,284) thousand at March 31, 2025[90] - This improvement was driven by $8,853 thousand in foreign currency translation adjustments during Q1 2025[90] Accumulated Other Comprehensive Income (in thousands) | Metric | Balance at March 31, 2025 (in thousands) | Balance at December 31, 2024 (in thousands) | Change (in thousands) | | :------------------------------------ | :------------------------------------ | :------------------------------------ | :-------------------- | | Foreign currency | $(28,764) | $(37,617) | $8,853 | | Unrealized loss on intercompany foreign currency transactions | $(3,520) | $(3,520) | $0 | | Total Accumulated Other Comprehensive (Loss) Income | $(32,284) | $(41,137) | $8,853 | Note 11. Capital Structure This note outlines the company's authorized capital stock, common stock, and the repurchase of preferred stock - As of March 31, 2025, the Company's authorized capital stock included 16,666,667 shares of common stock and 10,000,000 shares of preferred stock[91] - No dividends have ever been declared or paid on common stock[92] - All outstanding shares of Series B Perpetual Non-Convertible Preferred Stock were repurchased on June 28, 2024, and no shares remain outstanding or authorized for issuance as of March 31, 2025[96] Note 12. Stock Plans This note details the company's stock-based compensation plans, expenses, and unamortized costs for awards - The Company maintains two stock-based compensation plans (2015 and 2017 Plans) for employees, outside directors, and consultants[97] - Total stock-based compensation expense increased from $1,110 thousand in Q1 2024 to $2,129 thousand in Q1 2025, with performance-based cash units (PBCU) accounted for as liability awards increasing significantly from $21 thousand to $693 thousand[106] - As of March 31, 2025, the total unamortized stock-based compensation cost for unvested restricted stock awards and stock options was $7.9 million, and for unvested PBCU was $4.5 million, both expected to be recognized over approximately 2.3 years[107] Stock-Based Compensation Expense (in thousands) | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :------------------------------------ | :------------------------------------ | :------------------------------------ | | Total stock-based compensation expense | $2,129 | $1,110 | | Equity classified awards: | | | | Stock options | $115 | $198 | | Restricted stock awards | $940 | $428 | | Performance-based cash units | $381 | $463 | | Liability classified awards: | | | | Performance-based cash units | $693 | $21 | Note 13. Restructuring This note reports restructuring charges and accrual balances related to workforce reductions and associated costs - Restructuring charges were $118 thousand for Q1 2025, down from $219 thousand in Q1 2024, primarily related to employee termination costs from workforce reductions[108] - The restructuring accrual balance decreased from $712 thousand at December 31, 2024, to $158 thousand at March 31, 2025[108] Restructuring Charges and Accrual (in thousands) | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :-------------------------- | :------------------------------------ | :------------------------------------ | | Restructuring charges | $118 | $219 | | Metric | Balance at March 31, 2025 (in thousands) | Balance at December 31, 2024 (in thousands) | | :-------------------------- | :----------------------------- | :----------------------------- | | Restructuring accrual | $158 | $712 | Note 14. Income Taxes This note provides details on income tax expense, effective tax rate, and unrecognized tax benefits - Income tax expense increased from $0.6 million in Q1 2024 to $1.3 million in Q1 2025[109] - The effective tax rate was approximately (50.3%) for Q1 2025, primarily due to permanent adjustments (including Global Intangible Low-Taxed Income) and valuation allowances[109] - Unrecognized tax benefits were $4.4 million at March 31, 2025, with $3.8 million potentially recognized within the next 12 months due to the lapse of the statute of limitations[110] Income Tax Expense and Effective Tax Rate (in thousands) | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :-------------------------- | :------------------------------------ | :------------------------------------ | | Income tax expense | $1,278 | $603 | | Effective tax rate | (50.3)% | 11.9% | Note 15. Earnings Per Common Share This note presents basic and diluted earnings per common share and weighted average shares outstanding - Basic EPS was $(0.37) for Q1 2025, a decrease from $0.24 in Q1 2024. Diluted EPS also decreased from $0.23 to $(0.37)[115] - The weighted average common shares outstanding (basic) increased from 9,842 thousand in Q1 2024 to 10,201 thousand in Q1 2025[115] Earnings Per Common Share (in thousands, except per share) | Metric | Three Months Ended March 31, 2025 (in thousands, except per share) | Three Months Ended March 31, 2024 (in thousands, except per share) | | :------------------------------------ | :------------------------------------------------- | :------------------------------------------------- | | Net (loss) income attributable to Synchronoss | $(3,817) | $2,341 | | Basic EPS | $(0.37) | $0.24 | | Diluted EPS | $(0.37) | $0.23 | | Weighted average common shares outstanding — basic | 10,201 | 9,842 | | Weighted average common shares outstanding — diluted | 10,201 | 10,277 | Note 16. Commitments This note outlines the company's non-cancelable agreements for hosting, support, and software, detailing future minimum payments - The Company has non-cancelable agreements for hosting, support, and software, with total future minimum payments of $20,718 thousand as of March 31, 2025[118][119] - The majority of these payments ($15,242 thousand) are due in 2025[119] Non-cancelable Agreements (in thousands) | Year | Non-cancelable Agreements (in thousands) | | :--- | :------------------------------------ | | 2025 | $15,242 | | 2026 | $3,431 | | 2027 | $1,903 | | 2028 | $142 | | Total | $20,718 | Note 17. Legal Matters This note discusses the conclusion of the SEC investigation and related civil actions, assessing their financial impact - The SEC investigation related to 2015-2016 financial transactions concluded with the Company paying a $12.5 million civil penalty by March 31, 2024[121] - Civil actions against two former management team members, related to the same transactions, resulted in penalties totaling $145,000 and disgorgement of $430,741, with the Company reimbursing associated costs by March 31, 2024[121] - Management believes current legal matters will not have a material impact on the Company's business, financial position, results of operations, or cash flows[120][122] Note 18. Additional Financial Information This note provides further details on other income and expense, net, primarily focusing on foreign exchange impacts - Other income (expense), net, was an expense of $5,579 thousand for Q1 2025, a significant decrease from an income of $3,811 thousand in Q1 2024, primarily due to non-cash foreign exchange losses on intercompany payables and receivables[123] Other Income (Expense), Net (in thousands) | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :-------------------------- | :------------------------------------ | :------------------------------------ | | Foreign exchange gains (losses) | $(5,579) | $3,801 | | Total Other Income (expense), net | $(5,579) | $3,811 | Note 19. Subsequent Events This note describes significant events occurring after the reporting period, including a new term loan facility and debt redemption plans - On April 24, 2025, Synchronoss entered into an Amendment to its Credit Agreement, establishing a new $200 million, four-year term loan facility[124][125] - The proceeds from this new loan, along with cash on hand, are intended to redeem all $121 million outstanding Senior Notes around May 12, 2025[125] - The new loan matures on April 24, 2029 (subject to a springing maturity clause) and bears interest at SOFR (not less than 2.50%) plus a 7.00% margin (with one 0.50% stepdown)[126] - The Amended Credit Agreement includes a quarterly covenant limiting the consolidated secured leverage ratio to 6.30 to 1.00 or under, and a monthly minimum subscriber covenant for certain material contracts[126] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the Company's financial condition, results of operations, and liquidity for the three months ended March 31, 2025, compared to the same period in 2024. It highlights key revenue and expense trends, liquidity sources, cash flow activities, and critical accounting policies, along with forward-looking statements and risk factors Forward-looking Statements This section highlights the inherent uncertainties and risks associated with future financial results and business strategies - The report contains forward-looking statements regarding future results, financial condition, business strategy, and management plans, which are subject to substantial risks and uncertainties[129] - Key risks include adverse changes in economic environments (foreign currency, tariffs), market trends, new laws/regulations, technological advancements, security breaches, liquidity needs, legal proceedings, and geopolitical tensions[130] - The Company operates in a very competitive and rapidly changing environment, and actual results may differ materially from expectations[131] Overview This section provides a general description of Synchronoss Technologies, Inc.'s business, products, and market strategy - Synchronoss Technologies, Inc. is a leading provider of white label cloud software and services, helping customers keep subscribers, systems, networks, and content in sync[134] - The Synchronoss Personal Cloud platform is a secure, scalable white label solution designed for smartphones, tablets, and desktops, aiming to increase ARPU and reduce churn for operator customers[135] - Solutions are marketed through the corporate website, direct sales teams across North America, Europe, Middle East and Africa (EMEA), and Asia-Pacific (APAC), and industry partnerships[136] Revenues This section discusses the company's revenue generation model, customer concentration, and future growth drivers - Most revenues are generated on a subscription basis from customer contracts typically ranging from three to five years[137] - The future success of the business depends on the continued growth of B2B and Business-to-Business-to-Consumer transactions and expansion into the telecom (TMT) market globally[138] - The Company's top five customers accounted for 99.1% of net revenues in Q1 2025 (97.2% in Q1 2024), with Verizon and AT&T each accounting for more than 10%. The loss of either would have a material negative impact[140] Current Trends Affecting Our Results of Operations This section identifies key market trends, such as mobile content growth and cloud storage demand, influencing the company's performance - Growth in the Synchronoss Personal Cloud™ solution is driven by the global increase in content-rich mobile devices replacing traditional PCs[141] - The essential need for secure backup, syncing, and sharing of content from mobile devices (smartphones, connected cars, personal health and wellness devices, and connected home devices) is a key driver[141] - The long-term business is expected to be driven by the need for content from these devices to be stored in a common cloud[141] Discussion of the Condensed Consolidated Statements of Operations This section analyzes the company's operational performance, including revenue, expenses, and net income trends - Net revenues decreased by $0.8 million (1.75%) YoY to $42.2 million in Q1 2025, primarily due to a decline in professional services revenue from contract terminations[142] - Total costs and expenses decreased by $4.4 million (11.47%) YoY, driven by lower cost of revenues, R&D, and SG&A expenses due to restructuring and cost-saving initiatives[143][144][145] - Income from operations increased by $3.7 million (79.83%) YoY to $8.2 million, but net loss was $3.8 million in Q1 2025, a significant decline from net income of $4.5 million in Q1 2024, mainly due to increased interest expense and foreign exchange losses[142][149][150] Condensed Consolidated Statements of Operations (in thousands) | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | Change (in thousands) | YoY Change (%) | | :------------------------------------ | :------------------------------------ | :------------------------------------ | :-------------------- | :------------- | | Net revenues | $42,213 | $42,965 | $(752) | -1.75% | | Cost of revenues | $8,711 | $10,223 | $(1,512) | -14.79% | | Research and development | $9,698 | $10,331 | $(633) | -6.13% | | Selling, general and administrative | $11,379 | $13,257 | $(1,878) | -14.17% | | Income from operations | $8,229 | $4,576 | $3,653 | 79.83% | | Interest expense | $(5,422) | $(3,517) | $(1,905) | 54.17% | | Other (expense) income, net | $(5,579) | $3,811 | $(9,390) | -246.39% | | Net (loss) income | $(3,817) | $4,475 | $(8,292) | -185.31% | Liquidity and Capital Resources This section assesses the company's ability to meet its short-term and long-term financial obligations, including cash position and funding sources - As of March 31, 2025, the Company had $29.1 million in cash and cash equivalents and generated $0.3 million in operating cash flows for Q1 2025[152] - Non-U.S. subsidiaries held approximately $12.1 million of cash and cash equivalents that are available for use by global operations[152] - Management believes current cash, financing sources, working capital management, and expected positive cash flows, combined with continued expense reductions, will be sufficient to fund operations for at least the next 12 months[154] - The Company maintains a policy of indefinite reinvestment of cumulative unremitted foreign earnings, except for its Indian subsidiary[153] Discussion of Cash Flows This section analyzes the company's cash generation and usage across operating, investing, and financing activities - Net cash provided by operating activities decreased from $0.5 million in Q1 2024 to $0.3 million in Q1 2025, driven by cloud subscriber growth and reduced operating costs, offset by unfavorable working capital movements[157] - Net cash used in investing activities decreased from $3.8 million in Q1 2024 to $3.3 million in Q1 2025, primarily funding product development for Cloud offerings[158] - Net cash used in financing activities decreased from $2.1 million in Q1 2024 to $1.3 million in Q1 2025, mainly due to Term Loan principal payments and stock-based withholding taxes, with no preferred stock dividend payments in 2025[159] Cash Flow Summary (in thousands) | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | Change (in thousands) | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------- | | Net cash provided by operating activities | $293 | $527 | $(234) | | Net cash used in investing activities | $(3,310) | $(3,803) | $493 | | Net cash used in financing activities | $(1,278) | $(2,129) | $851 | Effect of Inflation This section evaluates the impact of inflationary pressures on the company's input costs and overall financial results - Inflationary increases in certain input costs, such as occupancy, labor and benefits, and general administrative costs, have impacted the business[160] - Management does not believe these impacts have had a material effect on the Company's results of operations during the three months ended March 31, 2025, and 2024[160] Contractual Obligations This section details the company's future payment commitments, including debt, leases, and purchase obligations - Total contractual obligations as of March 31, 2025, were $277,046 thousand, including finance lease obligations, interest, operating lease obligations, purchase obligations, Senior Notes Payable, and Term Loan[161] - The largest portion of payments ($172,174 thousand) is due in 2026-2027, which includes $121,387 thousand for Senior Notes Payable[161] - A significant portion of the Term Loan principal ($60,000 thousand) is due in 2028[161] Contractual Obligations (in thousands) | Obligation Type | Total (in thousands) | 2025 (in thousands) | 2026-2027 (in thousands) | 2028 (in thousands) | | :-------------------- | :------------------- | :------------------ | :----------------------- | :------------------ | | Finance lease obligations | $1,538 | $733 | $805 | $0 | | Interest | $36,057 | $13,154 | $18,667 | $4,236 | | Operating lease obligations | $23,752 | $5,683 | $13,793 | $4,276 | | Purchase obligations | $20,718 | $15,242 | $5,334 | $142 | | Senior Notes Payable | $121,387 | $0 | $121,387 | $0 | | Term Loan | $73,594 | $1,406 | $12,188 | $60,000 | | Total | $277,046 | $36,218 | $172,174 | $68,654 | Uncertain Tax Positions This section discusses unrecognized tax benefits and their potential impact on the company's financial position - Unrecognized tax benefits associated with uncertain tax positions were $4.4 million at March 31, 2025[162] - The Company anticipates that $3.8 million of these benefits, primarily related to research and development credits and other U.S. tax positions, may be recognized within the next 12 months due to the lapse of the statute of limitations[162] - The ultimate settlement of these liabilities is not expected to materially affect the Company's liquidity[162] Critical Accounting Policies and Estimates This section highlights the significant judgments and estimates used in preparing the company's financial statements - The condensed consolidated financial statements are prepared in accordance with U.S. GAAP, requiring significant management judgment and estimates[164] - Estimates and assumptions take into account historical and forward-looking factors, including potential impacts from current geopolitical tensions[165] - There were no significant changes in critical accounting policies and estimates during the three months ended March 31, 2025, compared to the Annual Report on Form 10-K for the year ended December 31, 2024[166] Recently Issued Accounting Standards This section refers to Note 2 for a discussion of recently issued accounting standards and their potential impact - For a discussion of recently issued accounting standards, refer to Note 2. Basis of Presentation and Consolidation of the Notes to Condensed Consolidated Financial Statements in Item 1 of this Form 10-Q[167] Off-Balance Sheet Arrangements This section confirms the absence of material off-balance sheet arrangements for the reporting periods - The Company had no off-balance sheet arrangements as of March 31, 2025, and December 31, 2024, that are material to investors[168] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section discusses the Company's exposure to market risks, primarily related to interest rate fluctuations and foreign currency exchange rates, and its strategies for managing these risks Market Risk This section outlines the company's investment objectives and exposure to market fluctuations, primarily in financial instruments - The Company deposits its excess cash in high-quality financial instruments, primarily money market funds and certificates of deposit, denominated in United States dollars[169][170] - The primary objective of investment activities is to preserve capital for funding operations while maximizing income without significantly increasing risk[170] - All market-risk sensitive instruments were entered into for non-trading purposes[170] Foreign Currency Exchange Risk This section details the company's exposure to foreign currency translation and transaction risks from international operations - The Company is exposed to translation risk due to foreign operations using local currencies, which affects the comparability of financial results when translated into U.S. dollars[171] - The Company is also subject to foreign currency transaction risk from conducting business and incurring costs in local currencies in other countries[172] - The Company does not hold any derivative instruments or engage in hedging activities to mitigate foreign currency risk[172] Interest Rate Risk This section assesses the company's sensitivity to interest rate fluctuations on both interest income and variable-rate debt - The Company is exposed to the risk of interest rate fluctuations on interest income earned on cash and cash equivalents; a hypothetical 100 basis point movement would increase annual interest income by approximately $0.3 million[174] - The Term Loan bears variable interest (Adjusted Term SOFR + 5.50%, with a 2.50% floor), making net income sensitive to interest rate movements; a hypothetical 100 basis point increase would increase annual interest expense on the debt by $0.7 million[175] - The Company does not hold any derivative instruments or engage in hedging activities to mitigate interest rate risk[175] Item 4. Controls and Procedures This section details the evaluation of the Company's disclosure controls and procedures and internal control over financial reporting, confirming their effectiveness and reporting no material changes Evaluation of Disclosure Controls and Procedures This section confirms the effectiveness of the company's disclosure controls and procedures as evaluated by management - The Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of the registrant's disclosure controls and procedures as of March 31, 2025[176] - Based on this evaluation, they concluded that the registrant's disclosure controls and procedures were effective as of March 31, 2025[176] Changes in Internal Control Over Financial Reporting This section reports no material changes in the company's internal control over financial reporting during the period - No changes in internal control over financial reporting were identified during the three months ended March 31, 2025, that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting[177] Limitations on Effectiveness of Controls and Procedures This section acknowledges that controls provide reasonable, not absolute, assurance due to inherent limitations and resource constraints - Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives[178] - The design of disclosure controls and procedures and internal control over financial reporting must reflect resource constraints and management's judgment in evaluating benefits relative to costs[178] PART II. OTHER INFORMATION This section covers additional information not included in the financial statements, such as legal proceedings, risk factors, and exhibits Item 1. Legal Proceedings This section refers to Note 17 for details on material pending legal proceedings, which management believes will not have a material adverse effect on the Company's operations - For a discussion of material pending legal proceedings that could impact the Company's results of operations, financial condition, or cash flows, refer to Note 17. Legal Matters in Item 1 of this Form 10-Q[180] Item 1A. Risk Factors This section states that there have been no material changes to the risk factors previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2024 - There have been no material changes to the Company's risk factors as previously disclosed in Part I, Item 1A. included in its Annual Report on Form 10-K for the year ended December 31, 2024[181] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The Company reported no unregistered sales of equity securities or use of proceeds during the period - None[182] Item 3. Defaults Upon Senior Securities The Company reported no defaults upon senior securities during the period - None[183] Item 4. Mine Safety Disclosures This item is not applicable to the Company - Not Applicable[184] Item 5. Other Information This section states that no director or officer adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the reporting period - No director or officer of the Company 'adopted' or terminated a 'Rule 10b5-1 trading arrangement' or 'non-Rule 10b5-1 trading arrangement' during the period covered by this Quarterly Report on Form 10-Q[185] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including organizational documents, equity incentive plans, certifications, and XBRL documents - Exhibits include the Restated Certificate of Incorporation, Amended and Restated Bylaws, Certificate of Elimination of Series B Perpetual Non-Convertible Preferred Stock, and the Amended and Restated 2015 Equity Incentive Plan[186] - Certifications by the Principal Executive Officer and Principal Financial Officer pursuant to Rule 13a-14(a) and 13a-14(b) of the Exchange Act are filed[186] - XBRL Instance, Schema, Calculation Linkbase, Definition Linkbase, Labels Linkbase, and Presentation Linkbase Documents are included[186] SIGNATURES The report is signed by Jeff Miller, Chief Executive Officer, and Louis Ferraro, Chief Financial Officer, on May 6, 2025, certifying its accuracy - The report is signed by Jeff Miller, Chief Executive Officer (Principal Executive Officer), and Louis Ferraro, Chief Financial Officer, on behalf of Synchronoss Technologies, Inc[187][188] - Date of signature: May 6, 2025[188]