Synchronoss Technologies(SNCR) - 2024 Q1 - Quarterly Results

Executive Summary Q1 2024 Financial Highlights Synchronoss Technologies achieved significant financial improvements in Q1 2024, with total revenue growing to $43.0 million and recurring revenue exceeding 91%, while enhancing profitability with expanded gross margins and increased net income and adjusted EBITDA | Metric | Q1 2024 | Q1 2023 | YoY Change | | :--- | :--- | :--- | :--- | | Total Revenue | $43.0 Million | - | Growth | | Recurring Revenue % | >91% | - | - | | GAAP Gross Margin | 67% | - | Expanded | | Adjusted Gross Margin | 76% | - | Growth | | Net Income | Increased $15.7 Million | - | Growth | | EPS | $0.23 | $(1.39) | Improved | | Adjusted EBITDA | $10.9 Million | - | Grew 78% | - Company reaffirmed its full-year 2024 performance guidance[1] First Quarter and Recent Operational Highlights Management Commentary CEO Jeff Miller highlighted the company's strategic transformation towards high-margin personal cloud services, leading to streamlined operations and improved financial health, driven by the SoftBank partnership and platform enhancements - Strategic transformation to a global cloud solutions provider, focusing on high-margin personal cloud services[3] - Successful launch of Anshin Data Box personal cloud application with SoftBank, expanding international markets[4] - Introduction of Enhanced Plans and Auto-scaling to boost platform capabilities, operational efficiency, and marketing flexibility[4][5] - Personal cloud users grew 7% year-over-year, driving recurring revenue to over 91%[5] - Profitability improved through post-divestiture cost restructuring, achieving an adjusted EBITDA margin of 25.4%[5] Key Performance Indicators ("KPIs") and Financial Commentary CFO Financial Commentary CFO Lou Ferraro noted a strong financial start to 2024 with adjusted EBITDA up 78%, operational streamlining post-divestiture, and plans to use a $28 million tax refund to reduce capital costs - Adjusted EBITDA grew 78% to $10.9 million, indicating a strong financial start[8] - Immediate operational streamlining measures implemented post-divestiture to enhance profitability of the personal cloud business[8] - Final payment of SEC obligations completed, paving the way for free cash flow generation in 2024[8] - Plan to utilize an upcoming $28 million US federal tax refund to reduce capital structure costs[8] Q1 2024 Financial Results Synchronoss achieved comprehensive improvements in revenue and profitability in Q1 2024, with total revenue up 2.4% to $43.0 million, net income turning positive, and adjusted EBITDA significantly increasing by 78% | Metric | Q1 2024 | Q1 2023 | YoY Change | | :--- | :--- | :--- | :--- | | Recurring Revenue % | 91.1% | 87.9% | Increased 3.2 percentage points | | Cloud User Growth | Approx. 7% | - | Continuous growth | | Total Revenue | $43.0 Million | $42.0 Million | Grew 2.4% | | Gross Profit | $28.7 Million | $27.3 Million | Grew 5.1% | | Gross Margin | 66.9% | 65.1% | Increased 1.8 percentage points | | Operating Income (Loss) | $4.6 Million | $(2.0) Million | Significant improvement | | Net Income (Loss) | $2.3 Million | $(13.4) Million | Significant improvement | | EPS | $0.23 | $(1.39) | Significant improvement | | Adjusted EBITDA | $10.9 Million | $6.1 Million | Grew 78% | | Adjusted EBITDA Margin | 25.4% | 14.5% | Increased 10.9 percentage points | | Cash and Cash Equivalents (End of Period) | $19.1 Million | $24.6 Million (Dec 31, 2023) | Decreased | | Free Cash Flow | $(3.3) Million | $(4.2) Million | Improved | | Adjusted Free Cash Flow | $0.6 Million | $(0.1) Million | Improved | 2024 Financial Outlook Full Year 2024 Guidance Synchronoss expects positive trends to continue in 2024, reaffirming full-year financial guidance including at least $10 million in net cash flow and high single-digit to low double-digit cloud user growth - Expected net cash flow of at least $10 million in 2024[11] - Anticipated cloud user growth rate to remain in the high single-digit to low double-digit range in 2024[11] | Metric | FY 2024 Guidance | | :--- | :--- | | GAAP Revenue | $170.0 Million - $175.0 Million (Growth 5-8%) | | Adjusted EBITDA | $42.0 Million - $45.0 Million | Conference Call Conference Call Details Synchronoss held a conference call on May 7, 2024, at 4:30 PM ET to discuss Q1 results, with access via online registration or the investor relations website for webcast and replay - Conference call held on May 7, 2024, at 4:30 PM ET[14] - Online registration link provided to obtain dial-in information[16] - Webcast and replay available on the Synchronoss Investor Relations website[17] Non-GAAP Financial Measures Explanation of Non-GAAP Measures Synchronoss provides non-GAAP financial information to help investors assess ongoing operational performance and compare with industry peers, excluding certain non-recurring or non-core cash-settled expenses - Non-GAAP metrics include adjusted revenue, adjusted gross profit, adjusted gross margin, adjusted EBITDA, non-GAAP net income (loss) attributable to Synchronoss, non-GAAP diluted net income (loss) per share, free cash flow, and adjusted free cash flow[18] - Company believes non-GAAP metrics aid in evaluating ongoing operational performance and comparing with industry peers[18] - Non-GAAP adjustments include stock-based compensation, acquisition-related costs, restructuring charges, litigation and remediation costs, depreciation and amortization, interest income and expense, gain/loss on divestitures, income tax provision, and non-controlling interests and preferred stock dividends[19] - Non-GAAP financial measures should not be considered in isolation from or as a substitute for GAAP financial information[20] Forward-Looking Statements Forward-Looking Statements Disclaimer This press release contains "forward-looking statements" about Synchronoss's future expectations, plans, and prospects, which are subject to unpredictable risks, assumptions, estimates, and uncertainties - Forward-looking statements are based on current expectations and projections, but are subject to unpredictable risks, assumptions, estimates, and uncertainties[21] - Actual results may differ materially from those expressed or implied in forward-looking statements[21] - Company undertakes no obligation to update any forward-looking statements due to new information, future events, or other reasons[21] About Synchronoss Company Overview Synchronoss Technologies (Nasdaq: SNCR) is a global leader in personal cloud solutions, using its SaaS platform to help service providers build secure connections, simplify onboarding, and drive user engagement - Synchronoss Technologies is a global leader in personal cloud solutions[22] - Its SaaS cloud platform aims to help service providers build secure connections with users, simplifying onboarding and fostering user engagement[22] - The platform's goals are to increase revenue, reduce expenses, and accelerate time-to-market[22] Financial Tables Condensed Consolidated Balance Sheets As of March 31, 2024, Synchronoss's total assets were $298.5 million, a slight decrease from $310.3 million on December 31, 2023, with cash and cash equivalents also declining | Item | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | 19,100 | 24,572 | | Accounts receivable, net | 22,482 | 23,477 | | Operating lease right-of-use assets | 13,867 | 14,791 | | Goodwill | 182,150 | 183,908 | | Other assets | 60,904 | 63,589 | | Total assets | 298,503 | 310,337 | | Liabilities and Stockholders' Equity | | | | Accounts payable and accrued expenses | 39,243 | 46,602 | | Deferred revenue | 656 | 1,095 | | Debt, non-current | 136,649 | 136,215 | | Operating lease liabilities, non-current | 21,953 | 23,593 | | Other liabilities | 4,742 | 4,898 | | Preferred stock | 58,802 | 58,802 | | Redeemable non-controlling interest | 12,500 | 12,500 | | Stockholders' equity | 23,958 | 26,632 | | Total liabilities and stockholders' equity | 298,503 | 310,337 | Condensed Consolidated Statements of Operations Synchronoss achieved significant operational improvement in Q1 2024, with net revenue increasing, total costs and expenses decreasing, leading to operating income turning positive and net income significantly improving to $2.3 million | Item (in thousands, except per share data) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net revenue | $42,965 | $41,985 | | Cost of sales | 10,223 | 10,960 | | Research and development | 10,331 | 12,744 | | Selling, general and administrative | 13,257 | 15,966 | | Restructuring charges | 219 | 342 | | Depreciation and amortization | 4,359 | 3,932 | | Total costs and expenses | 38,389 | 43,944 | | Operating income (loss) | 4,576 | (1,959) | | Interest income | 208 | 94 | | Interest expense | (3,517) | (3,454) | | Other income (expense), net | 3,811 | (2,975) | | Income (loss) from continuing operations before income taxes | 5,078 | (8,294) | | Income tax provision | (603) | (295) | | Net income (loss) from continuing operations | 4,475 | (8,589) | | Net loss from discontinued operations | — | (2,342) | | Net income (loss) | 4,475 | (10,931) | | Net income (loss) attributable to Synchronoss | $2,341 | $(13,391) | | Diluted net income (loss) per share | $0.23 | $(1.39) | | Diluted weighted-average common shares outstanding | 10,277 | 9,653 | Condensed Consolidated Statements of Cash Flows In Q1 2024, Synchronoss reported net cash inflow from operating activities of $0.5 million, with net cash outflows from investing and financing activities, resulting in a decrease in cash and cash equivalents at period end | Item (in thousands) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net income (loss) from continuing operations | $4,475 | $(8,589) | | Net loss from discontinued operations | — | (2,342) | | Net cash provided by operating activities | 527 | 1,295 | | Net cash used in investing activities | (3,803) | (5,470) | | Net cash used in financing activities | (2,129) | (2,299) | | Effect of exchange rate changes | (67) | 113 | | Net increase (decrease) in cash and cash equivalents | (5,472) | (6,361) | | Cash and cash equivalents at end of period | $19,100 | $15,560 | Reconciliation of GAAP to Non-GAAP Financial Measures Synchronoss provided a reconciliation of GAAP to non-GAAP financial measures, showing improved adjusted gross profit, adjusted gross margin, significantly increased adjusted EBITDA, and positive adjusted free cash flow in Q1 2024 | Item (in thousands, except per share data) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | GAAP revenue | $42,965 | $41,985 | | Adjusted gross profit | $32,789 | $31,195 | | Adjusted gross margin | 76.3% | 74.3% | | GAAP net income (loss) attributable to Synchronoss | $2,341 | $(13,391) | | Non-GAAP net income attributable to Synchronoss | $4,572 | $(6,654) | | Non-GAAP diluted net income (loss) per share | $0.44 | $(0.69) | | Adjusted EBITDA | $10,893 | $6,107 | | Free cash flow | $(3,276) | $(4,175) | | Adjusted free cash flow | $622 | $(146) |