Q4 2019 Earnings Call
Readings welcome to the Synchronoss technologies Inc. fourth quarter 2019 earnings conference call. At this time, all participants are any listen only mode. A question and answer session will follow the form presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad.
Please note. This conference is being recorded I will now turn the conference over to your host joke really you may begin.
Thank you good afternoon, everyone.
Welcome to the thing Chris Synchronoss technologies fourth quarter 2019 earnings call, when Lori President and CEO and David Clark CFO, joining me on the call.
During the call we will make statements about our expectations for 2020 and beyond these maybe considered forward looking statements within the meaning of federal Securities laws.
These statements about financial trends future results of operations and financial position.
As prospects and market opportunities.
Forward looking statements are identified by words, such as expects believes anticipates intends and other indications of future expectations.
These forward looking statements are based on the business environment as we currently see it and include certain risks and uncertainties.
Please refer to our SEC filings for more information on the specific risk factors that may cause actual results to differ any forward looking statements on this call are based on assumptions as of today and we undertake no obligation to update these statements as a result of new information or future events.
In addition to U.S. GAAP reporting we report certain financial measures that did not confirmed the gap. We believe these non-GAAP measures enhance the understanding of our performance reconciliation of the GAAP measures to their non-GAAP measures. In addition to descriptions of the non-GAAP measures can be found in today's earnings press release, I'll now turn the call over to Glenn Laurie.
Thanks, Joe Good afternoon, everyone.
Good day after market, we announced earnings for the fourth quarter, which represent a solid finish to 2019.
Revenue was 90.6 million, which is the highest quarterly revenue total since the fourth quarter of 27 team and adjusted EBITDA was 6.5 million, our sixth consecutive quarter of positive adjusted EBITDA.
For the full year revenue was 308.7 million EBITDA was 27.6 million, which is in line with the revised guidance. We issued on last quarter's call. It's unfortunate that S. T. I your shoes obscure what a strong financial results the company had in 2019.
Without these issues, we would have hit both our original revenue and EBITDA guide for the year.
I want to leave investors today with three very clear messages first.
The major new business wins, we booked in 2019 and the quality of our new business funnel. We believe we have the business in hand to meet our financial objectives in the coming years.
The results in fourth quarter, which is our first full quarter without a major contribution from S. T. I should provide investors with the objective evidence a bar momentum.
We continue to be optimistic about the additional new deals in our pipeline and in all four of our platforms and believe we have even more new contracts ahead of us and night in 2020.
Double digit revenue growth is a reasonable expectation and 2020 and we will discuss when we talk about for your guidance in a moment.
I want to make it clear if we simply execute on the numerous new business wins, we booked in 29 team along with the quality of our pipeline. We believe we can fuel profitable revenue growth and 2020.
Second.
We have 39 million of cash in the fourth quarter end.
<unk> up from 20 million in third quarter, David will discuss the drivers of cash balances in a moment, we continue to focus on optimizing our liquidity levels, improving free cash flow, reducing our investment in working capital and monetizing our assets.
And third we have taken and continue to take positive actions to optimize our cost structure for the past two years, we produced operational expenses, while simultaneously investing in our product platforms to grow the business. This is evidenced by improvements in our adjusted gross margin. The progress we made a narrowing gap and operating loss.
And the consistent positive adjusted EBITDA, we have delivered over the past six quarters.
And we're not done as we continue to look for additional opportunities to continue to optimize our cost structure, David will provide more details in a moment.
Let me highlight some of the company's 2019 business wins.
Our announcement this morning of our cloud deal, where they TMT, which is the U.S. based tier one cloud deal we discussed in the third quarter call means that we now have the two largest scares me United States, enabling our cloud platform.
Combined 18 team Verizon represent over 270 million subscribers.
We also launched Tracfone cloud this quarter, adding another 21 million subscribers to our total addressable market and launched our cloud service owner shorts pocket deep application in February.
These customers represent an additional addressable market of approximately 20 million subscribers across multiple continents.
Well 80, M.T. tracfone in a short.
Early in their deployment, we are confident we will see incremental revenue in 2020, and these customers will grow into meaningful revenue stream for synchronous from your for years to come.
For example, assuming a very modest 5% penetration over the three years. These customers have the potential to grow into a pure SaaS revenue stream for synchronous that nearly equals our Clark our current cloud business.
We continue to execute well and bill one or subscriber base within our existing cloud customers, Verizon British Telecom proximate SFR and frontier organic subscriber growth at Verizon what's in the low teens in 2019, demonstrating that our cloud continues to drive strong value proposition for mobile phone users in it.
Dish in and 29, GE and an early 2020, we have renewed contracts with three of our legacy cloud customers BT British telecom for an additional five years approximately an additional three years and SFR an additional two years.
We are working with all of our existing customers to bring best practices for growing their base of cloud subscribers, they realize that simply by refreshing and renewing their efforts to market. The cloud platform will help them drive incremental revenue and incremental EBITDA.
This is low hanging fruit for both our customers and Synchronoss and we're seeing good uptake here.
Our sales momentum in cloud is a strong validation of the interest being fueled by three key drivers first carries must look for new sources of incremental revenue and weve shown the industry that our cloud platform is a plug and play solution that achieved that goal second as the industry moves towards widespread adoption of low latency Fiveg technology.
We believe that onboard device based storage will dilute decrease in importance.
And the most valuable and personal customer content will be stored in the cloud.
And third mobile operators now know their customer data is perhaps one of their most valuable asset.
And that they cannot and should not relinquish control over that data to a competitor that will monetize it we are squarely at the epicenter of these three powerful trends.
Another trend impacting our customers and the wireless ecosystem is is the advancement in customer messaging, specifically Rcs based advanced messaging cares globally have seen competition from over the top messaging apps with a clear goal disintermediate the carriers from their customers and take all the monetization opportunities available.
In the messaging space.
In Japan, and now in the United States synchronous has shown the carriers how to compete and enable the technology that will help them defeat this threat.
Many of you saw the presentation that the Japanese carriers gave that does lab Tokyo in late 2019 outlining their plans to grow the plus message Rcs application from 13 million to 40 million subscribers by the end of 2021.
They also highlighted use cases in which they are seeing 85% open rates for Rcs b to C business to consumer messaging.
Exceeding the 40% open rates did experience in traditional b to C E mail and SMS messaging campaigns.
We believe this data coming out of Japan deployment indicates that our Rcs messaging solution will evolve into a powerful digital and E commerce platform for our customers.
Our success in Japan was a key factor and helping US win the Rcs advance messaging contract with the cross carrier messaging initiative or CCM I joint venture of 80, Mg Sprint T mobile and Verizon in November of 2019, our work with CCM I will drive meaningful license licensing revenue in 20 Twond.
And beyond and in fact already made a meaningful contribution to the fourth quarter of 2019 revenue and we are seeing upside in the total minimum contract value from additional programming work that was recently outsourced to synchronous by the joint venture.
Also note.
There are approximately 230 million smartphones, United States compared to approximately 70 million in Japan. So the U.S. market is roughly three times the size of the Japanese market. As a result, we believe that she she am I Rcs messaging deployment in 2020 will be extremely attractive to brands that want to reach customers with a more engaging.
Interactive and effective marketing tactics that they can deploy.
Our first mover advantage in launching advanced messenger into Pan and now bring into United States gives us global credibility when competing for advanced messaging deals in other parts of the world. It is clear to global operators that there is an rcs messaging solution available that's already been deployed and its operating at scale. We believe this gives synchronous.
Unique competitive position that no other company and ecosystem can claim.
We made solid progress and continuing to build out or digital experience platform or de X P and 29 team as investors know the basis of Rdx. Pete was our 2018 acquisition of Honeybee, which gave US a cloud based purpose built unique low code no code platform to build and manage omni channel customer journey.
Okay and workflows.
And 2020, we combined our journey creator within advanced catalog and decision engine modules and now believe DXP is the most comprehensive tool for a low code no code customer journey creation and management.
We believe we're in the REIT space at the right time with DXP <unk> Recent Inc. Magazine article called low code No code software platforms. The industry Disruptor, you should pay attention to Unsided Gartner and Forrester research. It indicates these platforms will top 21 billion in spending by 2022 and account for 65% of all.
Development by 2024.
We signed several new customers for do you expect in 2019, including wireless advocates a major third party provider and retail or wires products and services with over 600 retail locations as well as our selection by Amazon is an integrator for digital products for operators around the world the first of which will be launching this quarter and British.
American tobacco were BHP, where DXP is being used to create manage customer buying experiences initially in the UK, Poland and Germany, we're seeing good progress in the proof of concept M.B.A.T. was so excited about what we're doing for them that they recently previewed the it solution at their board of directors meeting.
Within our I O T business, we completed a number of important objective set the stage for 2020 and going forward.
First we formed partnerships with some of the most important players and the Aiotv Smart building space, Errol tritium Anik and a current.
Arrow is now our global partner to provide equipment monitoring tools and installation services, the tritium and of course partnerships integrate the synchronous smart building platform with two most widely used building management systems, enabling us to add consumption analytics and system monitoring to their solutions, while enabling to wake.
Communications, So building owners can alter settings on the go.
In 2019, we also installed smart buildings platform at Rackspace headquarters and its data centers in San Antonio and which we help rackspace save approximately 19% on their monthly utility costs.
As a result, we're expanding the relationship to include five additional facilities in the U.S. and Europe.
It's a proof case like these that make us confident that there's are ready market for our solution validate the potential for this business to grow into a meaningful revenue contribution contributor in coming years.
As I said earlier, given the sale success and 29 team the new business was business wins, a new customer relationships that we are ramping this year. We believe we have the Benson hand to accelerate profitable revenue growth in 2020, David will discuss guidance shortly.
So in conclusion, we are entering 2020 with the business the cost structure the customers and obviously the people to grow profitably, we're optimistic about a year and feel good about our competitive positioning our white label cloud is helping carriers to drive additional revenue and profitability, while our messaging platform is helping them defeat the threat Oh.
Gee messaging applications are de X P. An Iraqi solutions are gaining momentum and bringing the synchronous name to entirely new industries, and increasing our addressable market outside of our traditional TMT space.
The entire team singularly focused on 2020 being near that we accelerate momentum continued to strengthen our balance sheet and continue to build for the future.
Lastly.
The impact of the krona virus or something all companies are contending with right now and we are no exception.
This juncture, it's difficult to predict what the impacts will be but here's what we know.
Mobile World Congress Barcelona, the biggest trade show in our industry was cancelled in February and that's traditionally unimportant show, where we have numerous productive conversations with our current and new potential customers.
In Asia Pacific, where we generated 16% of our revenue in 29 gene and in particular in Japan. Many of our customers are restricting travel on limiting visitors to their offices. We at Synchronoss have formulate an action plan to work through these issues and to do business in a different and new way.
That will allow us to continue to successfully moved forward under these circumstances, we believe that the guidance range David will discuss in a moment takes these factors into consideration and into account with what we know today.
We will monitor this daily and at the impact worsens, we believe that there may be additional cost actions that will have to take in the future.
With that David will discuss the financials David.
Thanks, Glenn and thanks, everyone for joining us I'll review, our fourth quarter and full year 2019 results and provide guidance for 2020.
Revenue for the quarter was $90.6 million up 10.3% compared to $82.1 million from year ago quarter.
For the full year revenue was $308.7 million compared to $325.8 million in 2018.
Excluding the third quarter S. T I write down full year revenue would have been $334.7 million up 2.7% year over year.
Recurring revenue was 62% of total revenue in the fourth quarter compared to 69% in the third quarter for the full year recurring revenue was 71% down from 79% in 2018 recurring revenue was a lower percentage of total revenue in 2019, primarily due to a licensing revenue we realize from CCM I am a Jeff Japan messaging initiatives.
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Cloud revenue was $41.1 million down, 3.4% compared to $42.6 million in last year's fourth quarter and up sequentially from $40.5 million in a third quarter.
For the full year cloud revenue was $162.7 million essentially flat from 162.6 and 2018 as we've noted in the past the accounting treatment of our cloud business moves revenue over the life of the contract which is why revenue was flat. Despite the fact, we grew subscribers in a low teens.
Digital revenue was $14 million in the fourth quarter. This compares to $25.3 million in the quarter a year ago for the full year digital revenue was $53.8 million down 45.9% from 99 point.
$4 million in 2018, primarily due to lower revenue STR.
Messaging revenue was $35.4 million up almost 150% from $14.2 million near go quarter, and I've, just over 100% from $17.1 million in the third quarter.
For the full year messaging revenue was $92.3 million up 44.4% from $63.9 million in 2018.
The increase was primarily driven by revenue from CCM, I and the Japan messaging initiatives.
I'll now discuss properly metrics.
Total cost and expenses were $108.8 million in the fourth quarter compared to $124.4 million in the fourth quarter of 2018, a decrease of 12.6%.
For the year total cost and expenses were $416.5 million, a decrease of 15% compared to $490.1 million in 2018.
The reduction in total cost and expenses reflects continued cost cutting operational efficiencies lower cost associated with data storage as we continue to migrate to the public cloud and lower restructuring charges in the year.
Within the 2019 expense base is the 25 million investment we made in future growth during the year a signal on last year's fourth quarter call.
We do not intend to make a similar level of incremental investment in 2020. In fact, we have plenty reduced total cost and expenses.
Again in 2020 to drive EBITDA I continue to optimize our cost structures by approximately $15 million.
Adjusted gross profit in the fourth quarter was $48.9 million and adjusted gross margin was 54%.
For the full year adjusted gross profit was $187.7 million and adjusted gross margin was 60.8% gross margins were a bit lower in Q4 than in prior quarters do the impact of lower margin licensing revenue associated with the initial execution stages of the CCM ideal.
We made meaningful progress to narrow losses in 2019.
For the fourth quarter non-GAAP loss from continuing operations attributable Synchronoss was $2.5 million, a decrease of 96.9% compared to a 80.8 million dollar loss in the year ago quarter for the full year was 53.8 million compared to 176.9 million in 20.
18, a 69.6% decrease.
Adjusted EBITDA for the quarter was $6.5 billion compared to $15.4 million in the fourth quarter 2018, and up from $5.8 million in third quarter 2019 for the full year, adjusted EBITDA was $27.6 million compared to $14 million in 2018.
Turning to the balance sheet and cash flow statement cash and marketable securities totaled $39 million at year end up from $20 million. The end of the third quarter. The increase in cash is driven by number of factors, including revenue from CCM I net of expenses cash receipts from S. T. I had a reduced outstanding a our balances and the sale of unused.
He addresses for approximately $5.5 million.
We also utilize $17 million from our Citibank supply chain financing.
Note that we ended the quarter would know drawdowns under our revolving line of credit was citizens bank and $10 million wood availability, although weve not use this line of credit to date in 2020, we do expect to utilize line throughout the year based on fluctuations in working capital.
In addition, I'll note we've done a good job managing our overseas cash if we have reduced overseas balances to what we believe is the minimum level needed to support international operations.
Accounts receivable was $65.9 million at year end after fourth quarter payments and netting out all the internet companies counts our balance sheet exposure to STR I was down to approximately $6 million at quarter end.
Net cash provided by operating to be for the year was $32 million compared to a 31.4 million dollar use of cash last year.
Now I'll turn the guidance.
In 2020 revenue is expected to be in the range of 320 $340 million and EBITDA, it's great to be in a range of $25 million to $35 million.
As Glenn mentioned like all companies, we're concerned with the Corona virus and our guidance range currently contemplates a potential impact on our revenue with what we know today.
Glenn mentioned, what we're seeing presently and if a krona vivus continues to impact economy. There are additional cost saving levers that we can pull.
Key to our assumptions as revenue and EBITDA contribution from new deals booked in 2019, we announced a number of new deals in 2019. They expect to contribute to 2020 revenue includes CCM My 18, T. cloud Tracfone Assurant, Amazon wireless advocates and others.
I'd like to provide a few detail on a few of these deals.
The contract with CCM I expect to be a major revenue can trigger for synchronous in the coming years and we continue to expect this contract to exceed the value of our messaging initiative in Japan, both from an overall contract value standpoint, and from a standpoint, its annual contribution to revenue and EBITDA. We also see upside.
To the contract in a couple of ways growth of messaging platform and sale of additional licenses and additional professional service work.
Oh. These I'll note, we expect to see contributions from additional work in the first half of 2020.
Investors know the Verizon is currently our largest customer and provides a significant portion of our cloud revenue. We are optimistic the 18 to cloud deal can bring similar value to synchronous overtime. However, it will take time as rising and building its subscriber base since 2013.
And while Tracfone, the largest NVNO and the United States has a smaller customer base and horizon 19, T.. We are optimistic of this new business wins.
Tracfone is bundling cloud with their higher value plants and expected to grow into meaningful customer and revenue contributor for synchronous.
In addition, the conventional wisdom that prepaid subscribers are different demographic than postpaid is changing as more and more subscribers move to economical prepaid plans.
Finally, most phones included in prepaid plans have lower onboard storage, increasing the importance of a cloud solution. So subscribers can store valuable data and content.
One final note.
The pervasive material weaknesses look noted in our last two 10-K reports are result of the 2017 re file in 2018, Refiling restatement have been Remediated and we believe there'll be no pervasive material weakness noted in the 2019 form 10-K, which we expect be filed later this week.
I will make a few closing remarks before we open the line for QNX Glenn.
Thank you David I, just wanted to reiterate the three points I started being in this call.
We have the business and sales pipeline today that we expect to propel growth for 2020.
We are seeing renewed marketing energy from our existing cloud customers to promote and grow their cloud business and we have three exciting new cloud customers and 80, Mg Tracfone and Assurant that have launched and of all launch their cloud offering in Q1 up 2020. Obviously this is encouraging for the future of our cloud business we believe.
The launch of advance messaging, United States with Cc, My and continued growth of the plus messenger platform in Japan will drive revenue momentum in the messaging business. In addition, our digital and I O T businesses are gaining momentum and expected to grow into major revenue contributors for synchronous.
Which will provide potential upside and 2020 and additional channel profitable growth in 2021.
And we are continuing to take strong actions to optimize our expense base and continue our cost reduction reduction efforts.
EBITDA guidance range for 2020 is reflective of additional cost savings that we have executed in the first quarter to position synchronous for profitable growth.
As we have mentioned we are watching the impact of the krona virus carefully. However, we believe we have a good plan of attack to move the business Ford and if needed take out additional costs in the event that there is a lasting impact on the overall business. All told we are very excited about 2020 with that let's take questions.
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Thank you at this time, we will be conducting a question and answer session. If he would like to ask your question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question Q you May press star too if you like to remove your question from the Q for participants using speaker equipment and maybe not.
Is there any pickup you had said before pressing the star keep.
One moment, please while we pull for questions.
Our first question is from Mike Walkley from Canaccord. Please proceed with your question.
Great. Thanks for taking my question congratulations on the 18 Chia cloud announcement.
Just a little more more color just given the experienced swift with horizon and having a top two carriers how should we think about just 2020 impact from this contract versus maybe that near the five year impact.
Hey, Mike. Thank you for the question I'll start and look to David as David and I. Both said you know we're really excited I'd have 18. She is a cloud partner, they obviously announced their launch today. So they're just getting started and as we said we do expect to see revenue in 2020 there.
Gonna grow their cloud business from from scratch, so from zero and as we've talked about in the past you know our economics and the and the business model is obviously a per subscriber model. So we will see that grow over the year or the the excitement also is just how excited 18. She is about having this product in place and and.
The ability to market this to the to their customers. So we're very optimistic and I'll, let David jump in I see it you know as he stated and when you think about the overall impact of three new cloud customers. You know, we obviously believe there's an opportunity for significant revenue growth as we in 2020, especially 21 and two.
22.
Right. So yeah, it's obviously embedded in our and our guidance expectation Mike.
Okay. It really depends on their marketing initiatives and how rapidly they grow as as we said there are starting from a standing start.
Yeah.
Makes sense and then just just on Verizon any update just on how that business is going with them and the timing for potential a renewal dates with them coming up anything you can share of on the horizon contracts.
I mean, we're still experiencing the subscriber growth we expected as I said, we basically because of six so six we basically spread out evenly throughout the life of the contract.
So that's the only up they really on the right yeah like I said in my comments, we've seen no strong growth obviously in 2019 I mentioned in the low teens.
Overall subscriber growth, we have a very very strong relationship obviously with that team and and excited about their marketing plans for 2020.
Great. Thanks.
And then.
As Glenn you guys have done some things with sprint and T mobile with that merger moving for can you talk about maybe any opportunities or benefits like that for cigarettes.
Yeah, we actually are in business with both today I really can't talk too much Mike about go forward you can imagine they were obviously working very very hard and both of them and 29 team trying to get the deal done and consummated and we hope to spend more time with them here early in the new.
A year and see where that takes us.
Okay great.
And then last question for me just just on the model just on the linearity for the year. It sounds like cloud should just grow overtime as the new customers add subscribers, but anything you can share maybe on messaging.
Do you see my there's some are there some milestones that will hit in different quarters or anything can help us think about that linearity of the year towards your guidance.
Yeah, Mike I think you guys as CCM I noted last year and their press releases when they just noted they would launch in 2020 once more information that comes out I think we can get more specific around what that might look like.
By quarter, but for now it's very difficult for us to do that.
Okay great.
Last question I guess, just on the a 15 million. In addition to cost saving you highlighted for 20, what should we expect to see that Oh, opex reductions or maybe some gross gross margin areas that even but you've also packing for probably been yeah, probably probably both Mike we're continuing to get more fish.
And on both the Cogs line and then also a within us Gina Yeah.
Right. Okay. That's done some of the deal announcements in the best wishes for 2020.
Thanks, Mike I appreciate it.
Our next question is from Richard Baldry from Roth Capital. Please proceed with your question.
Thanks, given the success you've had with the top carriers on a cloud front in the U.S. can you talk about whether they're similar potential globally.
Large scale carriers.
What the differences would be to attack international markets versus the U.S. Yeah, absolutely I. Appreciate the question Yeah. We are we obviously today.
With our current set of customers do cloud business in Europe.
And we fully expect a that the same types of issues on the same types of opportunities. The same reasons that I gave in my opening remarks that carriers are seeing are happening globally. So when you look at you know looking for incremental revenue when you look at how important the.
The content on people smartphones is when you look at adding fiveg and that really almost go into a a low work arguably no latency, we see the same things happening globally. So without question. As you know we spent a lot of time and effort in 2018 white labeling our cloud we did that so would be.
Well as I call. It a plug and play initiative and we are definitely having conversations in Europe and Asia around this so we expect to see more opportunities. We just launched three new clouds already in early 2020, and like I said, we're having good good and constructive conversations with.
Others around the world.
And a couple.
Quickly on [noise].
Amazon expect any thoughts on its first geography is up first quarter can you talk about your experiences for that to date and what a longer term or second half 2020 outlook for that partnership would be.
Yeah I can you know we Oh, we are excited missense that we've we've we've completed our first in going through our first launch obviously.
The launches have been press back a little bit from a time perspective.
But we have our list of carriers that they've asked us to work with we have dates and we expect to make more announcements as we go through.
The early stages here up 2020.
As far as impact if you recall that business model, so revenue share model based on subscriber.
So similar comments at all make that we talk about with cloud with each one of those implementations.
We started we start from scratch and they go out market.
When we look at the list a we're optimistic that we will see revenue in 2020 and this will also be one of those great opportunities in a multiplier as we head into 21 and 22.
Okay last thing to be in in 2019, you sort of set up your model with an eye to discretionary 20 25 million in spending depending on the successes in deal momentum sort of tie that spending to the revenue growth.
Have you done something similar in 2020 or do you envision something similar in 2020 or do you feel like you've got that momentum behind you at the wins that you put together now so you can puts for more of a baseline spend in and not to try to hold that same flexibility like you tried to doing 2019, yeah rich it's a it's.
So it's the latter so while we will be investing in the business are we actually expect a net out with a $15 million approximately expense cut at the end of the day.
So we will be investing to support growth, but at the same time pulling out costs to basically achiever.
Approximately 15 million net reduction and I would only add that some of those investments in 19, we're definitely one time investments.
And now we feel we have the ability to do the delivery to do you actually deliver on those deals that we have cut in 19 in what we believe we're going to be able to get done in 2000.
Great. Thanks, and congrats on the 18 to deal for me as well. Thank you.
Our next question is from Sterling Auty from JP Morgan. Please proceed with your question.
Yeah. Thanks, guys wondering if you could provide some additional color on some of the renewals you mentioned three of them, but Ah, but you've now now extended or closed.
What did what are the economics on those deals relative to what you had previously are they similar up down.
Yeah. So the three you're talking about remind everybody obviously would be T for five years proximate for three and SFR for to all all three cloud deals and cloud partners.
As David said the way, we do the majority of our cloud deals is on a per subscriber basis and per subscriber dollar amount and so as we are obviously push those out we have to peanut butter that revenue over that period of time. So you can imagine that as you grow your base.
And as you go further out.
The the actual cost structures and Rev shares on those per subscriber will be lower.
So I think but you obviously get a longer longer tenure, so the impacts on those are pretty small, but there are impacts.
As you can tell by as David went through the numbers you know we grew our subscribers and cloud and were basically flat year over year and part of that was some of these these are obvious ability for us to renew these contracts.
Got it and I think we all respect that you've taken your best shot as you know trying to estimate.
Current a virus impact on on the business, but look at the midpoint a range I think kind of flattish year over year, but what should we think about as the puts and takes in the different revenue segments within that guidance range in terms of.
What ones growing versus shrinking versus staying the same.
Yeah, the midpoint of what we just issued his 330, so that is up from a three OE, we just announced three online. So sorry, my apologies I, Oh, yes, probably rothsay, but but what are the puts and takes some good growth rates in the different revenue segments within that 330.
Said, we we're expecting growth from a lot of the new deals we closed in 2019, a and that really had emphasis on the three new cloud deals and also the new messaging deals. So I think I think the primary drivers are those businesses.
Yeah, and I would I would add this in your comment on Corona virus.
My comments through this and what I said earlier and I'll give a little more obviously we're concerned.
First and foremost about our employees and our customers. We we are going to do everything we can continue to drive the business like I said, we put together a strategy.
Obviously with mobile World Congress being Barcelona, being canceled we are going and touching every single one of those customers that we had planned to talk to and we've been in the process of doing that so we're just I think like most of the companies around the globe again, it's gonna have to operate differently for awhile and so we'll will utilize technology and video and and.
We will do a lot less traveling and a lot less face to face, but we believe we formulated a really solid plan to continue to move the business forward.
Understood. Thank you.
Thank you.
Our next question from Orin Hirschman from an IDH investment partners. Please proceed with your question.
Hi, congratulations on the progress.
On the in terms of Japan and in terms of actually seeing the next step there, whether it's additional subscribers and coming back for additional licenses or whether it's actually seeing b to b M. B C.
Advertising revenue.
And like thing monetize what's the timeframe, perhaps look like is that timeframe can push back a little bit.
Yeah, I think you broke up a little bit arm, but I think your first question was about Japan and the revenue and what we think we'll see at this point obviously the focus there is is on licenses and volume is what's happening in Japan as as we stated and I will restate a you know they came.
Now that the three carriers and talked about hitting 13 million subscribers. The goal of getting to 40 million subscribers by the end of 21, obviously significant for us from a standpoint of that volume that we're looking for a in the licensing revenue. Obviously, we will continue to work with the carriers and other apps.
Specs of messaging that we've talked about and that.
The platform can do but that's really the focus right now.
Okay and in terms of the.
Taking it to the next step in terms of advertising revenues that are shared b to b b to C. I know you've done some small trials, what's the latest uptake there.
Yeah, we have done some some very.
Good productive trials, what we've learned a lot. We've also done some trials and other parts of the world as well and we're in the process of working through that as you know we we have a thing called an M.P. was the messaging marketplace that is part of our platform.
That is exciting it's an onboarding portal for the brands, we're definitely looking forward to having more conversations about that and timing, but that's really all I can say at this point or.
Okay. Do you think is there's more this year, though in terms of that rollout.
Yeah, We don't know me I really cant speculate that far out other than what we talked about on the licensing side and when we have an opportunity we'll talk more about that.
Okay and just one additional follow question on the CCM I mentioned that there is all more programming going on can you elaborate on that particular, you said in the first half to 2020.
I was referring to actually additional professional services work or in that a we expect to happen in the first after the are you.
Is that it sounds like it was more than you. Originally expected is that because of that gets you will.
Features et cetera.
Yep. So yeah. There wasn't it was a it's a bit more and also remember without with us having.
Doneness in Japan.
And having the expertise and capabilities, we're going to support she she might any way they ask us to and obviously in this case they've come to us for for some support and we'll continue to be there form and be the best partner, we can be.
Okay. Thanks, very much thanks Marni.
And we have reached the end of the question and answer session and I will now turn the call back over to management for closing remarks, yeah. Thank you very much again, thank you everybody for joining the call today.
We appreciate you are listening and support and like I said in my comments. The team is very very excited about where we are and positioned in 2020, and we look forward to talking to you again next quarter.
This concludes todays conference and you may disconnect your lines at this time thinking for your participation.