Synchronoss Technologies(SNCR) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements and Notes This section presents the unaudited condensed consolidated financial statements and accompanying notes for the company as of June 30, 2025 Condensed Consolidated Balance Sheets The balance sheet reflects total assets of $291.4 million, a slight decrease from year-end 2024, with a notable increase in stockholders' equity Condensed Consolidated Balance Sheets (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $24,622 | $33,375 | | Total current assets | $72,827 | $81,382 | | Goodwill | $188,784 | $179,408 | | Total assets | $291,418 | $293,825 | | Liabilities & Equity | | | | Total current liabilities | $42,380 | $40,298 | | Long-term debt, net | $181,215 | $184,840 | | Total liabilities | $241,985 | $251,550 | | Redeemable non-controlling interest | $— | $12,500 | | Total stockholders' equity | $49,433 | $29,775 | | Total liabilities and stockholders' equity | $291,418 | $293,825 | Condensed Consolidated Statements of Operations The company reported a significant net loss in Q2 2025, driven by a large foreign exchange loss and debt modification expenses Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Net revenues | $42,486 | $43,458 | $84,699 | $86,423 | | Income from operations | $6,860 | $4,297 | $15,089 | $8,873 | | Debt modification expense | $(4,384) | $— | $(4,384) | $— | | Loss on debt extinguishment | $(1,993) | $— | $(1,993) | $— | | Foreign exchange (loss) gain | $(12,531) | $1,220 | $(18,110) | $5,021 | | Net (loss) income | $(19,604) | $(494) | $(23,421) | $3,981 | | Basic EPS | $(1.87) | $0.01 | $(2.27) | $0.24 | | Diluted EPS | $(1.87) | $0.01 | $(2.27) | $0.24 | Condensed Consolidated Statements of Cash Flows Net cash from operations decreased significantly, while financing activities were dominated by a major debt refinancing transaction Condensed Consolidated Statements of Cash Flows (in thousands) | Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $2,578 | $11,840 | | Net cash used in investing activities | $(6,685) | $(7,510) | | Net cash used in financing activities | $(4,884) | $(5,105) | | Net decrease in cash and cash equivalents | $(8,753) | $(924) | | Ending cash and cash equivalents | $24,622 | $23,648 | Notes to Condensed Consolidated Financial Statements The notes detail a major debt refinancing, the termination of a joint venture, and a significant post-quarter tax refund used for debt repayment - The company's revenue is primarily generated from North America, which accounted for $80.5 million of the $84.7 million total revenue for the first six months of 2025[35] - As of June 30, 2025, the company has $133.7 million in remaining performance obligations, with approximately 99.4% expected to be recognized as revenue within the next two years[41] - In April 2025, the company entered into a new $200 million term loan (the "2025 Term Loan") to redeem its $121.4 million in 2021 Senior Notes and settle its existing $73.6 million 2024 Term Loan[72] - In July 2025, subsequent to the quarter end, the company received a $33.9 million tax refund and used $25.4 million to pay down the principal of the 2025 Term Loan[137] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the Q2 net loss to non-operating items like foreign exchange impacts and debt refinancing costs, while noting operational cost savings Results of Operations Revenues saw a slight decline from an expired contract, but operating income improved due to cost-saving measures, offset by significant non-operating expenses - Net revenues decreased by $1.0 million in Q2 2025 compared to Q2 2024, primarily due to a $1.3 million impact from an expired customer contract, partially offset by subscriber growth[154] - Cost of revenues, R&D, and SG&A expenses all decreased in Q2 2025 compared to the prior year period, driven by cost-saving initiatives and restructuring measures implemented in late 2024[155][156][157] - A foreign exchange loss of $12.5 million was recorded in Q2 2025, compared to a gain of $1.2 million in Q2 2024, due to non-cash impacts on intercompany balances between U.S. and European entities[165] - The company incurred $4.4 million in debt modification expenses and a $2.0 million loss on debt extinguishment in Q2 2025 related to the refinancing of its debt facilities[163][164] Liquidity and Capital Resources The company's liquidity is supported by existing cash and operating cash flows, and was significantly bolstered by a post-quarter tax refund - The company had $24.6 million in cash and cash equivalents at June 30, 2025, and generated $2.6 million in cash from operations during the first six months of the year[181] - Cash used in financing activities was $4.9 million for the six months ended June 30, 2025, driven by a major debt refinancing where proceeds from a new $200M term loan were used to repay $121.4M of senior notes and other debt[188] Summary of Contractual Obligations as of June 30, 2025 (in thousands) | Obligation | Total | 2025 (6 months) | 2026-2027 | 2028 | Thereafter | | :--- | :--- | :--- | :--- | :--- | :--- | | 2025 Term Loan | $200,000 | $2,500 | $20,000 | $17,500 | $160,000 | | Interest | $79,395 | $11,436 | $43,150 | $19,288 | $5,521 | | Operating lease obligations | $19,879 | $3,837 | $13,013 | $3,029 | $— | | Purchase obligations | $19,983 | $9,334 | $9,571 | $1,078 | $— | | Total | $320,645 | $27,650 | $86,579 | $40,895 | $165,521 | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company faces market risks from foreign currency fluctuations and interest rate changes on its variable-rate debt - The company is exposed to foreign currency translation risk as it operates internationally and must translate foreign subsidiary financial results into U.S. dollars[200] - The company's 2025 Term Loan bears interest at a variable rate (SOFR + 7.00%, with a 2.50% floor); a hypothetical 100 basis point increase in interest rates would increase annual interest expense by approximately $1.6 million[204] Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective, with no material changes to internal controls during the quarter - Based on an evaluation as of the end of the period, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective[205] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[206] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is not currently involved in any legal proceedings expected to have a material adverse effect on its business - The company is not currently subject to any legal proceedings expected to have a material adverse effect on its operations[136][208] Item 1A. Risk Factors A new risk factor related to the restrictive covenants in the 2025 Term Loan Agreement has been introduced - A new risk factor has been added concerning the 2025 Term Loan Agreement, which contains restrictive covenants that limit the company's operational and financial flexibility[210][211] - A breach of the loan's covenants could lead to an event of default, allowing the lender to terminate commitments and declare all outstanding obligations immediately due and payable, which could significantly harm the business and its prospects[212] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities during the period - None[213] Item 5. Other Information No directors or officers adopted or terminated Rule 10b5-1 trading arrangements during the quarter - No director or officer adopted or terminated a Rule 10b5-1 trading plan during the covered period[216]