Synchronoss Technologies(SNCR) - 2022 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q3 2022, total revenue decreased by 14% to $59.9 million from $69.8 million in the prior year period, primarily due to deferred revenue runoff, divestiture of assets, unfavorable foreign exchange impacts, and a slowdown in purchasing activity [41][42] - Adjusted EBITDA decreased by 7% to $11.5 million, with a margin of 19.1%, compared to $12.3 million and 17.6% in the prior year period [46] - Net loss improved to $1.3 million or negative $0.01 per share, compared to a net loss of $9.8 million or negative $0.11 per share in the prior year [45] Business Line Data and Key Metrics Changes - Cloud revenue was $38.6 million, down 11% year-over-year, but accounted for 64% of total revenue, up from 62% in the same period last year [36] - Digital revenue decreased by 33% year-over-year to $9.6 million, making up 16% of total revenue [37] - Messaging revenue was $11.7 million, down 5% year-over-year, representing 20% of total revenue [37] Market Data and Key Metrics Changes - The company experienced a negative impact of approximately $1.8 million from foreign currency fluctuations in Q3, contributing to the overall revenue decline [42] - The global economic environment, including foreign exchange, represented revenue headwinds across all business lines, causing delays in customer decisions and slowing mobile handset purchases [14] Company Strategy and Development Direction - The company continues to execute its cloud-first strategy, focusing on subscriber growth and cloud invoiced revenue growth, which reached 65% of total revenue for the first nine months of 2022, up from 58% in the previous year [9][41] - The company aims to simplify its business composition to highlight the strong profit and growth profile of its cloud business while driving free cash flow improvements [14] - New customer agreements and expansions, including a letter of intent with a Tier 1 global operator, are expected to contribute significantly to future revenue [20][21] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenging macroeconomic environment but emphasized the solid fundamentals of the business and the ongoing focus on profitability and cash flow generation [33][34] - The company expects continued double-digit growth in cloud subscribers and invoiced cloud revenue, projecting incremental increases in revenue and EBITDA in Q4 [48][49] - The anticipated growth in 2023 is contingent on the macroeconomic landscape, but improvements in the cloud business are expected to drive overall EBITDA performance [64] Other Important Information - The company has made significant operational improvements, evidenced by an $11.8 million improvement in operating income driven by cost reductions [52] - The company is maintaining its full-year 2022 adjusted EBITDA expectations between $48 million and $55 million, while adjusting total GAAP revenue expectations to between $253 million and $260 million [50][51] Q&A Session Summary Question: Cost improvement initiatives and future plans - Management confirmed that the primary cost-saving actions are completed, but they continue to examine the operating cost structure for further efficiencies [56] Question: Revenue expectations from new Tier 1 customer - Management indicated that the new customer is expected to generate over $50 million in revenue over the life of the contract, with approximately $1 million expected in Q4 from initial implementation and professional services [58][59] Question: Outlook for product categories and EBITDA growth - Management anticipates that cloud will continue to grow as a percentage of overall revenue, while messaging and digital will also grow but at a moderated pace [63] - The macroeconomic landscape will influence EBITDA growth, but improvements in the cloud business are expected to drive overall performance [64]