Synchronoss syncs Q2 with new Verizon deal

The timing was suspiciously good. A case no doubt of "Synchronoss-ation" (Ed. note: groan).

In parallel with the announcement of a fairly robust set of Q2 figures, SaaS and PaaS specialist Synchronoss Technologies flagged a five-year renewal of its white-label personal cloud agreement with largest customer Verizon.

Investors got caught up in the feel-good factor. Synchronoss' share price shot up 8% when news broke.

Synchronoss CEO Glenn Lurie, on the company's Q2 earnings conference call according to the Seeking Alpha transcript said turnover, along with EBITDA and free cash flow (both adjusted), "all exceeded internal and external expectations."

Lurie claimed that the five-year extension at Verizon had "substantially similar structure and financial terms" to the previous cloud agreement. "This is great for Synchronoss and its shareholders long term because of the increased certainty and stability," enthused the CEO.

The new Verizon deal apparently includes a joint marketing agreement to "step up" Synchronoss' marketing efforts to sell Verizon Cloud to its wireless subscriber base.

"We have not previously had, to this degree, a dedicated and coordinated direct marketing effort to Verizon's existing wireless customers," added Lurie.

Show me the figures

Although Q2 turnover was down 2%, year-on-year, to $76.5 million, it beat analyst estimates.

Adjusted EBITDA margin, at 15%, was the highest since Q4 2018.

Adjusted EBITDA came in at $11.5 million in Q2, up from $8.7 million during the same quarter last year.

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Positive adjusted free cash flow of $13 million, said Synchronoss, drove an increase in cash and liquidity to $42.8 million at quarter end, up from $31 million at the end of the first quarter.

Desire for better EBITDA margins has not come without some pain, however.

On announcement of Q1 results, Synchronoss said it cut 10% of its workforce, including CMO Mary Clark, in order to reduce expenses.

The company said the action was only partly related to the COVID-19 pandemic and was designed to better position the company to obtain firmer financial footing.

Ken Wieland, contributing editor, special to Light Reading

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