synchronoss overview
TRANSCRIPT
1 © 2018 Synchronoss Technologies, Inc. All Rights Reserved.© 2018 Synchronoss Technologies, Inc. All Rights Reserved.
SYNCHRONOSSOVERVIEW
BUILDING BLOCKS FOR A DIGITAL FUTURE Q1 2019
2 © 2018 Synchronoss Technologies, Inc. All Rights Reserved.
Legal Disclaimers
This presentation includes statements concerning Synchronoss and its future expectations, plans and prospects that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words “may,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “believes,” “potential” or “continue” or other similar expressions are intended to identify forward-looking statements. Synchronoss has based these forward-looking statements largely on its current expectations and projections about future events and financial trends that it believes may affect its business, financial condition and results of operations. These forward-looking statements speak only as of the date of this press release and are subject to a number of risks, uncertainties and assumptions including, without limitation, risks relating to the Company’s ability to sustain or increase revenue from its larger customers and generate revenue from new customers, the Company’s expectations regarding expenses and revenue, the sufficiency of the Company’s cash resources and its ability to satisfy or refinance its existing debt obligations, the Company’s growth strategies, the anticipated trends and challenges in the business and the market in which the Company operates, the Company’s expectations regarding federal, state and foreign regulatory requirements, the pending lawsuits against the Company described in its most recent SEC filings, and other risks and factors that are described in the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 and Quarterly Report on Form 10-Q for the quarter ended March 31, 2019, which are on file with the SEC and available on the SEC’s website at www.sec.gov. The company does not undertake any obligation to update any forward-looking statements contained in this presentation as a result of new information, future events or otherwise.
3 © 2018 Synchronoss Technologies, Inc. All Rights Reserved.
Synchronoss Technologies at a Glance
EXPANDINGFrom Operators
to TMT
NEW MARKETS
Increasing New
Customer Opportunities
SCALINGVia Partnerships
NEW CHANNELS
Increased Sales
Velocity, Lower Costs
TRANSITIONFrom License to
Recurring
NEW MODELS
Increasing
Predictability
GROWINGFrom Domestic to
Global
NEW FOCUS
Increasing Reach
and Scale
• NASDAQ: SNCR
• 2018 Revenue: $326 million
• Market capitalization: $267 million (5/13/19)
• 200+ Customers, 1,500 Employees, 135+ Patents
• A history of solving complex technological issues for wireless carriers with innovative software solutions
• Newly configured leadership team driving significant turnaround and refocus of business model:
4 © 2018 Synchronoss Technologies, Inc. All Rights Reserved.
SEVERAL NEW DEALS ANNOUNCED
Strong Business Momentum in 2019
• New white label cloud customer launching in Q3 2019
• New Digital Experience Platform agreement with Amazon
• New IoT partnership with Microsoft
• Live IoT proof of concept with Rackspace
• Phase II of Japan Advanced Messaging Partnership
• Commercial launch of AT&T IoT Smart Cities initiative – first two customers
• White label cloud agreement with Assurant, one of the largest providers of device protection insurance
• 5 year extension of BT white label cloud agreement
• DXP reseller agreement with Rackspace
5 © 2018 Synchronoss Technologies, Inc. All Rights Reserved.
World-Class Leadership Team
28+ years of experience
• Previously President
and CEO of AT&T’s
Mobility Operations
• Led Negotiations for 1st
iPhone
• Led building of AT&T’s
IoT, Cricket – Flanker
Brand, and Digital Life
Businesses
30+ years of
experience
• Previously CFO of
Nutrisystem
(NASDAQ:NTRI)
• Suncom Wireless
(NASDAQ:TPCS)
• The Meet Group
(NASDAQ:
MEET)
25+ years of
experience
• Previously CMO
and SVP of
Roaming for
Syniverse
• VP Cibernet
20+ years of
experience
• Joined
Synchronoss in
2002
• Previously Agility
Communications
25+ years of
experience
• Joined
Synchronoss in
2006
• Previously
Group
Counsel, Intel
25+ years of
experience
• Joined
Synchronoss in
2016
• Previously WWVP
HR Openwave
• VP HR Deem
30+ years of
experience
• Previously
President of Ideal
Industries
Technology
Group
• VPGM Motorola
North America
Jeff Miller
Chief
Commercial
Officer
David Clark
Chief Financial
Officer
Mary Clark
Chief Product,
Marketing
Officer
Pat Doran
Chief
Technology
Officer
Ronald Prague
Chief Legal
Officer
Kevin Hunsaker
Chief People
Officer
Glenn Lurie
Chief
Executive
Officer
6 © 2018 Synchronoss Technologies, Inc. All Rights Reserved.
Current Trends Facing Our Customers
OVERALL TMT TRENDS:• Disintermediation
• Convergence
• Digital transformation
• FAANG impact
TECHNOLOGY:• Importance of customer
experience
• New modes of customer
experience
• Impact of intelligence (AI, ML,
NLP)
TELECOMMUNICATIONS:• Revenue growth slowing
• Smart phone growth slowing
• Capex increasing
• OTT disintermediation
MEDIA:• OTT, TV everywhere growing
• Content costs rising
• Social media influence
• Wireless carriers moving into
media
7 © 2018 Synchronoss Technologies, Inc. All Rights Reserved.
Synchronoss Platform Overview
CLOUD DIGITAL MESSAGING IOT
Value Added Service Channel Experience Management
Messaging Channel Innovation
M2M Channel Enabler
• 92PB+ Cloud Storage
• 95M+ Devices
• Intake of up to ~300TB+/day
• 200M+ Activations/year
• 95%+ Task Automation
VERIZON BT SPRINT AT&T SOFTBANK KDDI AT&T
• 450M+ Provisioned
Mailboxes
• 250M+ Active Subscribers
• 5-9’s Availability
• Smart Buildings Platform
• AT&T Smart Cities Partner
• Microsoft IoT Accelerator
Program partner
Rackspace DoCoMoNew Carrier
TBA* AmazonAssurant
* New significant carrier contract signed May
2019, partner to be disclosed later in 2019
Rackspace
Microsoft
8 © 2018 Synchronoss Technologies, Inc. All Rights Reserved.
Synchronoss Cloud Platform & Products
PERSONAL CLOUD APPLICATION
THE WORLD’S LARGEST WHITE LABEL CLOUD SOLUTION
PROVEN PREMIUM BUSINESS MODEL
WORLD WIDE PARTNER DISTRIBUTION
SECURE AND SCALABLE PLATFORM
Synchronoss is Positioned to Win In Cloud:
9 © 2018 Synchronoss Technologies, Inc. All Rights Reserved.
PLATFORM CLOUD PROVIDERS ARE COMPETITORS
REVENUE GROWTH IS SLOWING OR DECLINING
PROVIDES A BETTER CUSTOMER EXPERIENCE ACROSS TOUCH POINTS
PERSONAL DATA KEEPS ON GROWING
New, incremental profitable services revenue are at a premium
Operators are handing over valuable customer data to iOS and Android
Operators must own the whole customer experiences long-term – device and content
The growth in user-generated media and capabilities of 5G place new value on Cloud
Why Operators are Changing Their Views on Cloud
10 © 2018 Synchronoss Technologies, Inc. All Rights Reserved.
Synchronoss Digital Platform & Products
COORDINATED PAUSE
AND RESUME
CUSTOMER
EXPERIENCES ACROSS
CHANNELS
OMNI AND SINGLE CHANNEL
EASY TO OPERATE
CREATES FAANG-LIKE EXPERIENCES
SIMPLE INTEGRATION
Synchronoss is Positioned to Win In Digital:
11 © 2018 Synchronoss Technologies, Inc. All Rights Reserved.
DXP Solves a Critical Problem in Experience Management
▪ Coordinated pause and resume customer experiences
▪ Agile teams of IT and marketing working closely together
▪ Increased NPS from seamless, insightful experiences
Now, Digital Journeys creates…
“An Omni-Channel Experience”Today…
There is a hole in the IT Stack
▪ All channels must be integrated to back end
▪ Each channel requires its own work flow
▪ Each customer experience is hand coded
ONE TEAM
12 © 2018 Synchronoss Technologies, Inc. All Rights Reserved.
ACQUISITION & INTEGRATION IS EXPENSIVE & TIME CONSUMING
NO ONE CAN AFFORD TO HAVE A BAD CUSTOMER EXPERIENCE
INCREMENTAL NEW REVENUE MUST BE PROFITABLE
INNOVATION CAN’T HAPPEN SLOWLY
FANG-quality digital experiences are what consumers expect from companies
TMT companies struggling legacy systems - time and costs of convergence
New revenue growth, reduced cost and better customer experiences hallmark of
successful digital players
Innovation to customer experiences must happen within the window of opportunity
Why TMT
Companies
Need DXP to
Compete
13 © 2018 Synchronoss Technologies, Inc. All Rights Reserved.
Synchronoss Messaging Platform & Products
DEPLOYED ADVANCED MESSAGING SOLUTION
ECOSYSTEM MANAGEMENT PLATFORM
WELL POSITIONED WITH OPERATORS
MARKET LEADING CLIENT
Synchronoss is Positioned to Win In Messaging:
14 © 2018 Synchronoss Technologies, Inc. All Rights Reserved.
OTT MESSAGING PROVIDERS ARE GROWING OR PREFERRED
THERE ARE NEW REVENUE MODELS CARRIERS DON’T HAVE
Effective rate of messaging is zero and now included in rate structure
Operators must find new incremental areas of net/new revenue growth
OTT Messaging applications have become more relevant - Facebook is beginning to
harness the future of A2P
Advanced messaging features are attracting advertising, commerce, etc. revenue
Why
Operators
Need
Advanced
Messaging
OPERATOR MESSAGING BUSINESSES HAVE NO REVENUE
OPERATOR REVENUE GROWTH IS SLOWING OR DOWN
15 © 2018 Synchronoss Technologies, Inc. All Rights Reserved.
Synchronoss IoT Platform & Products
$10.2BN 20% 35% Estimated
Market Size by
2026
Return based on
savings per
engagement
CAGR
between 2017-
2025
The Smart Building Platform partnership that adds a new energy and building management offering to AT&T’s Smart Cities offering
20 21 22
Sources:
20 – Navigant Research
21 – Variant Market Research
22 –
END-TO-END SOLUTION APPROACH
WELL POSITIONED WITH OPERATORS
IOT TRACK RECORD
SMART BUILDINGS PLATFORM
Synchronoss is Positioned to Win In IoT:
16 © 2018 Synchronoss Technologies, Inc. All Rights Reserved.
IT’S HARD TO DRIVE EFFICIENCIES PROMISED IN THE TECHNOLOGY
DATA INTEGRATION DOESN’T REALLY EXIST
SMART BUILDINGS ARE BUT ONE PIECE IN THE IOT PUZZLE
There is no single place to combine data from all the systems and sensors.
There isn’t a single lens to reduce costs, create efficiencies in building management systems
Smart City Platforms need a vertical to start, integrate and then add - Telematics
Why Channel
Distributors
Need Smart
The Buildings
Platform
NONE OF THE EXISTING VERTICAL PLAYERS WORK TOGETHER
Management of multiple systems, OS’s, devices and data sources,
sensors is a challenge
17 © 2018 Synchronoss Technologies, Inc. All Rights Reserved.
FINANCIAL OVERVIEW
BUILDING BLOCKS FOR A DIGITAL FUTURE Q4 2018
18 © 2018 Synchronoss Technologies, Inc. All Rights Reserved.
Synchronoss: Executing on Financial Objectives
Financial Objective Proof Points
Build recurring revenue✓ $326 million revenue in 2018
✓ First quarter revenue $88.1 million, up 5.3% YOY and 7.3% sequentially
✓ 79% recurring revenue in 2018, 73% in Q1
Reduce cost base
✓ $25 million annual run rate cost savings exiting 2018
✓ Q1 2019 adjusted gross margins up 850 basis points YOY
✓ Q1 total operating expenses down 17% YOY
Improve profitability and cash flow
Grow EBITDA
✓ Consistent EBITDA improvement throughout 2018
✓ 2H18 Adjusted EBITDA of $24.8 million
✓ Q1 2019 Adjusted EBITDA of $6.6 million, a $17.4 million improvement
over Q1 2018
Increase capital efficiency
✓ Balance of convertible debt down to $64 million at May 3, 2019 due to
opportunistic early retirements in 2018 and 2019
✓ Net cash of $36.4 million as of May 3, 2019
19 © 2018 Synchronoss Technologies, Inc. All Rights Reserved.
Adjusted EBITDA Trend
($10.8)
$0.0
$9.4
$15.0
($15.0)
($10.0)
($5.0)
$0.0
$5.0
$10.0
$15.0
$20.0
Q4 2018
Q1 2018
Q2 2018 Q3 2018
▪ Consistent improvement in Adjusted EBITDA throughout the year
▪ $14 million of full-year Adjusted EBITDA, meeting guidance for the year
▪ Generated $24.8 million of Adjusted EBITDA in the second half
▪ 18.8% Adjusted EBITDA margin in Q4, exceeding end-of-year target of 15%.
$6.6
($10.8)($12.0)
($10.0)
($8.0)
($6.0)
($4.0)
($2.0)
$0.0
$2.0
$4.0
$6.0
$8.0
Q1 2018
Q1 2019
▪ Year over year improvement in adjusted EBITDA demonstrates
effectiveness of 2018 cost reduction efforts
2018 Quarterly Trend
($mil)
Q1 2019 Year-over-Year Trend
($mil)
20 © 2018 Synchronoss Technologies, Inc. All Rights Reserved.
40.00%
42.00%
44.00%
46.00%
48.00%
50.00%
52.00%
54.00%
56.00%
58.00%
Q1 18 Q1 19
Adjusted Gross Margin – Year Over Year Improvement
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
Q1 18 Q1 19
EBITDA Margin – Year Over Year Improvement
✓ Significant improvement in gross margin and EBITDA margin throughout 2018 and 2019
✓ Earnings leverage driven by cost reduction efforts – transition from data centers to cloud
for storage, office consolidation, headcount reductions, etc.
Improving Earnings Leverage Due to Cost Reduction Efforts
21 © 2018 Synchronoss Technologies, Inc. All Rights Reserved.
Product Portfolio Performance
▪ Strong growth in Premium Cloud subscribers
throughout the year
▪ Renewed Verizon contract for additional five years
▪ Renewed BT contract for additional five years in early
2019
▪ Signed new cloud contract with Assurant in early 2019
▪ Signed major new carrier cloud contract in early
2019; partner to be disclosed after service is
launched later this year.
▪ Acquired Digital Journeys platform 2018
▪ Entered Rackspace reseller relationship Jan 2019
▪ Announced Amazon partnership May 2019; DXP to
be used to integrate Amazon services such as
Amazon Prime, Prime Video, Amazon Music, and
Twitch with carriers worldwide
CLOUD
DIGITAL
$38.3
$40.7
$30.0
$32.0
$34.0
$36.0
$38.0
$40.0
$42.0
Cloud YOY Rev Growth
Q1 2018 Q1 2019
$23.0 $22.9
$0.0
$5.0
$10.0
$15.0
$20.0
$25.0
$30.0
Digital YOY Rev Growth
Q1 2018 Q1 2019
22 © 2018 Synchronoss Technologies, Inc. All Rights Reserved.
Product Portfolio Performance
$22.4
$24.5
$15.0
$17.0
$19.0
$21.0
$23.0
$25.0
$27.0
$29.0
Messaging YOY Rev Growth
Q1 2018 Q1 2019
MESSAGING
IOT
▪ Signed contract to develop advanced messaging for
the Japanese market in 2018
▪ Enables Japanese carriers to fend off competition
from OTT messaging apps
▪ Entered second phase of Japan advanced
messaging project in early 2019 – launch of A2P
messaging, enabling monetization opportunities
▪ AT&T Smart Buildings partnership gaining
momentum, with first two customers launching in Q2
2019
▪ Joined Microsoft Azure IoT Solutions Accelerator
program
▪ Announced Rackspace live proof of concept to
monitor, control, and optimize energy usage at
their 1,000,000 square foot headquarters facility
23 © 2018 Synchronoss Technologies, Inc. All Rights Reserved.
SNCR – Current Capital Structure
($mil) At 3/31/19 At 5/3/19:
Cash and marketable securities $ 110.3 $100.5
Convertible debt 97.2 64.1
Net cash position 13.1 36.4
Preferred stock $177.1
24 © 2018 Synchronoss Technologies, Inc. All Rights Reserved.
Consolidated Statement of Operations – First Quarter($000’s, unaudited)
25 © 2018 Synchronoss Technologies, Inc. All Rights Reserved.
Consolidated Statement of Operations – Full Year ($000’s, unaudited)
26 © 2018 Synchronoss Technologies, Inc. All Rights Reserved.
Reconciliation of GAAP to non-GAAP Financial Measures – Adjusted EBITDA($000s, unaudited)
27 © 2018 Synchronoss Technologies, Inc. All Rights Reserved.
Reconciliation of GAAP to non-GAAP Financial Measures($000s, unaudited)
28 © 2018 Synchronoss Technologies, Inc. All Rights Reserved.© 2018 Synchronoss Technologies, Inc. All Rights Reserved.
THANK YOU.
BUILDING BLOCKS FOR A DIGITAL FUTURE Q1 2019