Synchronoss Technologies(SNCR) - 2023 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements and Notes This section presents Synchronoss Technologies' unaudited condensed consolidated financial statements and detailed notes for Q2 and H1 2023 Condensed Consolidated Balance Sheets Total assets decreased to $384.1 million by June 30, 2023, from $398.1 million at year-end 2022, while total stockholders' equity declined Balance Sheet Highlights (In thousands) | Balance Sheet Highlights (In thousands) | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $19,329 | $21,921 | | Total current assets | $97,798 | $105,287 | | Total assets | $384,129 | $398,072 | | Liabilities & Equity | | | | Total current liabilities | $82,946 | $80,183 | | Long-term debt, net | $135,379 | $134,584 | | Total liabilities | $252,133 | $249,127 | | Total stockholders' equity | $51,148 | $68,097 | Condensed Consolidated Statements of Operations The company reported a net loss of $8.5 million in Q2 2023 and $19.4 million for H1 2023, driven by lower revenues and increased expenses Key Metrics (In thousands, except per share) | Key Metrics (In thousands, except per share) | Q2 2023 | Q2 2022 | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | :--- | :--- | | Net revenues | $59,713 | $65,236 | $117,421 | $131,102 | | (Loss) income from operations | $(3,947) | $4,894 | $(7,529) | $3,514 | | Net (loss) income | $(8,518) | $7,921 | $(19,449) | $4,884 | | Diluted EPS | $(0.13) | $0.06 | $(0.28) | $— | Condensed Consolidated Statements of Cash Flows Net cash from operations increased to $12.6 million in H1 2023, despite a net decrease in overall cash and equivalents Cash Flow Summary (In thousands) | Cash Flow Summary (In thousands) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $12,556 | $6,728 | | Net cash used in investing activities | $(10,344) | $(3,768) | | Net cash used in financing activities | $(4,904) | $(8,517) | | Net decrease in cash and cash equivalents | $(2,592) | $(5,992) | | Cash and cash equivalents, end of period | $19,329 | $25,512 | Notes to Condensed Consolidated Financial Statements These notes detail accounting policies, revenue recognition, debt, and a significant contract renewal with Verizon - The company's revenue is primarily derived from Cloud, NetworkX, and Messaging products, with the Americas being the largest geographical market, and subscription services representing the largest portion of revenue[43][44] - As of June 30, 2023, the aggregate amount of transaction price allocated to remaining performance obligations was $79.8 million, with approximately 96% expected to be recognized as revenue within the next two years[51] - The company has $141.1 million in aggregate principal amount of 8.375% Senior Notes due 2026, with a carrying value of $135.4 million as of June 30, 2023[73] - Subsequent to the quarter end, on July 18, 2023, the company entered into an amended agreement with Verizon, extending their contract for seven years until June 30, 2030[113][114] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses revenue decline due to deferred revenue runoff and asset divestitures, affirming sufficient liquidity for the next twelve months - The decrease in net revenues for Q2 2023 was primarily due to the expected runoff of deferred revenue recognized in Q2 2022 and revenue from the divested DXP and Activation assets in the prior year[131] - The increase in Selling, General and Administrative expense was mainly related to a lease impairment charge and non-recurring professional fees[134] - The company's top five customers accounted for 76.3% of net revenues for the first six months of 2023, with Verizon representing more than 10% of total revenues[125] - Management believes that existing cash, cash equivalents, and expected cash flows from operations will be sufficient to fund operations for the next twelve months[149] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company faces market risks from foreign currency fluctuations and interest rate changes, but does not use derivative instruments - The company is exposed to foreign currency translation risk as financial results from foreign operations are translated into U.S. dollars[167] - A hypothetical 100 basis point movement in interest rates would impact annual interest income by approximately $0.2 million[170] Item 4. Controls and Procedures Disclosure controls and procedures were effective as of June 30, 2023, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2023[171] - No material changes to the company's internal control over financial reporting were identified during the quarter[172] PART II. OTHER INFORMATION Item 1. Legal Proceedings This section refers to Note 13 for legal proceedings, highlighting the $12.5 million SEC civil penalty - For details on legal proceedings, the report refers to Note 13 of the financial statements[175] - The primary legal matter is a settlement with the SEC, resulting in a $12.5 million civil penalty to be paid over two years[110] Item 1A. Risk Factors New risks include strategic transaction uncertainty, high customer concentration, and financial institution stability concerns - The company has engaged a financial advisor to explore strategic transactions and has received a non-binding acquisition proposal from B. Riley Financial, creating uncertainty about its future direction[177] - Significant customer concentration risk persists, with the top five customers accounting for 76.3% of net revenues for the six months ended June 30, 2023[180] - New risks are identified concerning the potential failure of financial institutions where the company holds cash balances in excess of FDIC insurance limits[182][184] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - None[185] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities during the period - None[186] Item 5. Other Information The company reported no other information required to be disclosed in this item - None[188] Item 6. Exhibits This section lists filed exhibits, including CEO/CFO certifications and a new agreement with Verizon - Exhibits filed include CEO and CFO certifications (Sections 302 and 906 of Sarbanes-Oxley Act) and XBRL interactive data files[190] - A Change Request and Amendment related to the Application Service Provider Agreement with Verizon Sourcing LLC were filed as exhibits[190]