Q1 2024 Synchronoss Technologies Inc Earnings Call
Operator: Good afternoon. Welcome to Synchronoss Technologies' first quarter 2024 earnings conference call. Joining us today are Synchronoss Technologies President and CEO, Jeff Miller, and CFO, Lou Ferraro. Following their remarks, we will open the call to your questions. Then, before we conclude, I'll provide the necessary cautions regarding the forward-looking statements made by management during this call. I would like to remind everyone that this call will be recorded and made available for replay via a link in the Investor Relations section of the company's website at Synchronoss.com. Now, I'd like to turn the call over to Synchronoss CEO, Jeff Miller. Sir, please proceed. Thank you.
Good afternoon, welcome to synchronous Technologies' first quarter 'twenty 'twenty four earnings conference call. Joining us today are synchronous technology's, President and CEO, Jeff Miller and CFO Lou Ferraro following their remarks, we will open the call for your questions. Then before we conclude I'll provide the necessary cautions regarding the forward looking statements made by management.
Operator: This call I would like to remind everyone that this call will be recorded and made available for replay via a link in the Investor Relations section of the company's website at synchronous Dot com now.
Operator: Now I'd like to turn the call over to synchronous the CEO, Jeff Miller, Sir. Please proceed.
Jeff Miller: Thank you, Operator. Welcome, everyone, and thank you for joining us today.
Jeff Miller: Operator, welcome everyone and thank you for joining us today.
Jeff Miller: After the market closed, we issued a press release announcing our results for the first quarter ended March 31, 2024. A copy of the press release is available in the Investor Relations section of our website. In the first quarter, we continue to execute on our strategic transformation as a global cloud solutions provider, focusing solely on our high-margin personal cloud services. This targeted approach has allowed us to streamline our operations and enhance our financial profile, delivering top-line growth and improved profitability in Q1.
Jeff Miller: After the market closed we issued a press release announcing our results for the first quarter ended March 31 2024.
Jeff Miller: Copy of the press release is available in the invest in Investor Relations section of our website.
Jeff Miller: In the first quarter, we continued to execute on our strategic transformation as a global cloud solutions provider focused solely on our high margin personal cloud services.
Jeff Miller: This targeted approach has allowed us to streamline our operations.
Jeff Miller: Enhance our financial profile, delivering topline growth and improved profitability in Q1.
Jeff Miller: In the quarter, we grew total revenue to $43 million, with recurring revenue representing 91% of total revenue, positioning us as well to meet our annual financial target. This performance was accompanied by an improvement in adjusted gross margins to 76% from 74% in the prior year, while adjusted EBITDA grew 78%. Year over year, this led to $10.9 million in the quarter.
Jeff Miller: In the quarter, we grew total revenue to $43 million with recurring revenue representing 91% of total revenue.
Jeff Miller: <unk> well to meet our annual financial targets.
Jeff Miller: This performance was accompanied by an improvement in adjusted gross margins to 76% from 74% in the prior year while.
Jeff Miller: While adjusted EBITDA grew 78% year over year.
Jeff Miller: It reads it led to $10 9 million in the quarter.
Jeff Miller: The gains we are witnessing are a direct result of our transition to a cloud-only business model and the additional cost optimization efforts we undertook following the divestiture of our non-core businesses in Q4 of 2020. Further highlighting our strong start to the year, we are pleased to report positive net income of $2.3 million and earnings per share of $0.23 for the first quarter, representing a significant year-over-year improvement in net income of $15.7 million and EPS of $1.62 cents, respectively.
Jeff Miller: The gains we are witnessing are a direct result of our transition to a cloud only business model and the additional cost optimization efforts. We undertook following the divestiture of our noncore businesses in Q4 of 2023.
Jeff Miller: Further highlighting our strong start to the year. We are pleased to report positive net income of $2 3 million and earnings per share of 23 for the first quarter.
Jeff Miller: Representing a significant year over year improvement in the net income of $15 7 million and EPS of $1 62, respectively.
Jeff Miller: With our Q1 financial performance affirming our strategy, we are on track to elevate free cash flow generation to at least $10 million in 2020, and we anticipate further improvements in 2025 as we enhance revenue-to-cash conversion. As we embrace our Focus Cloud strategy in 2024, we're making substantial progress across our three main strategic priorities, which are, one, protecting and growing our cloud subscriber base. 2.
Jeff Miller: With our Q1 financial performance affirming our strategy, we are on track to elevate free cash flow generation to at least $10 million in 2024, and we anticipate further improvements in 2025 as we enhance revenue to cash conversion.
Jeff Miller: As we embrace our focused cloud strategy in 2024, we're making substantial progress across our three main strategic priorities, which are one protecting and growing our cloud subscriber base.
Jeff Miller: Leading with innovative technology to deliver key anchor features and 3. Expanding our global customer base. Our efforts in Q1 reflect strong advancements in each of these areas, setting a solid foundation for the rest of the year.
Jeff Miller: Leading with innovative technology to deliver key anchor features and three expanding our global customer base.
Jeff Miller: Our efforts in Q1 reflects strong advancements in each of these areas setting a solid foundation for the rest of the year.
Jeff Miller: Our consistent track record of protecting and growing our subscriber base continued as we recorded 7% increases in our subscribers, which is in line with our expectations for the year. Our strong relationships with key partners, such as Verizon, AT&T, and SoftBank, foster a collaborative environment for our teams to partner in developing and refining growth strategies. This includes multi-faceted approaches to subscriber acquisition to build upon our steadily increasing cloud subscriber base, which now well exceeds 10 million. Our long-term contract with Verizon, which extends through 2030, highlights the stability of our revenue. 75% of our total revenues are secured under contracts of at least four years.
Jeff Miller: Our consistent track record of protecting and growing our subscriber base continued as we recorded 7% increases in our subscribers, which is in line with our expectations for the year.
Jeff Miller: Our strong relationships with key partners, such as Verizon AT&T and Softbank.
Jeff Miller: Foster a collaborative environment for our teams to partner in developing and refining growth strategies.
Jeff Miller: This includes multifaceted approaches to subscriber acquisition to build upon our steadily increasing cloud subscriber base, which now well exceeds $10 million.
Jeff Miller: Our long term contract with Verizon, which extends through 2030.
Jeff Miller: Highlights the stability of our revenue with 75% of our total revenues secured under contracts of at least four years.
Jeff Miller: The recent edition of SoftBank, boasting over 100 million subscribers across its brands, offers a significant base to continue to build upon our current growth trajectory. My recent visit to Japan to meet with SoftBank's leadership team further solidified our shared vision for a seamless market entry and growth plan. We're particularly excited about expanding the Ancient Data Box's capabilities and capacity, gearing up for strong adoption. Our successful rollout of the Ancient Data Box with SoftBank not only extends our global footprint but also solidifies our role in driving cloud subscriber growth. And we're looking forward to the prospect of working with them for the long term.
Jeff Miller: The rest edition of recent addition of Softbank boasting over 100 million subscribers across its brands offers a significant base to continue to build upon our current growth trajectory.
Jeff Miller: My recent visit to Japan to meet with Softbank leadership team has further solidified our shared vision for a seamless market entry and growth plan.
Jeff Miller: We're particularly excited about expanding the engine data boxes capabilities and capacity.
Jeff Miller: During up for a strong adoption curve.
Jeff Miller: Our successful rollout of the interim data box with Softbank not only extends our global footprint, but also solidifies our role in driving cloud subscriber growth and we're looking forward to the prospect of working with them long term.
Jeff Miller: Turning to our second priority, we remain focused on delivering key anchor features to meet the evolving needs of our customers. Our ongoing efforts to enhance our technology stack in Q1 have laid a solid foundation for continued innovation and service excellence. A pivotal development in recent months is the introduction of auto scaling, which dynamically adjusts the capacity of our personal cloud platform to align with fluctuating demands. This capability not only enhances operational efficiency but also drives financial efficiency by optimizing resource usage and minimizing cost.
Jeff Miller: Turning to our second priority, we remain focused on delivering key anchor features to meet the evolving needs of our customers.
Jeff Miller: Our ongoing efforts to enhance our technology stack in Q1 have laid a solid foundation for continued innovation and service excellence.
Jeff Miller: A pivotal development in recent months as the introduction of auto scaling.
Jeff Miller: Dynamically adjust the capacity of our personal cloud platform to align with fluctuating demands as.
Jeff Miller: This capability not only enhances operational efficiency, but also drives financial efficiency by optimizing resource usage and minimizing costs. For example, with one customer we have significantly reduced our compute expenses by over 50% through the implementation of auto scaling.
Jeff Miller: For example, with one customer, we have significantly reduced our compute expenses by over 50% through the implementation of AutoScale. Additionally... Central to our strategy is the rollout of enhanced plans within the Synchronoss personal cloud platform, which we introduced at Mobile World Congress earlier this year. Enhanced plans offer telecom operators and mobile service providers the flexibility to present tiered service models ranging from basic to value-added and premium.
Jeff Miller: Additionally.
Jeff Miller: Central to our strategy is the rollout of enhanced plans within the synchronous personal cloud platform, which we introduced at mobile World Congress earlier. This earlier this year.
Jeff Miller: Enhanced plans offered telecom operators and mobile service providers, the flexibility to present tiered service models, ranging from basic to value added and premium.
Jeff Miller: This approach enables operators to select services, such as generative AI, to fine-tune their customer offerings, thereby driving subscriber growth, revenue growth, and customer retention. The successful deployment of our technology with SoftBank also demonstrates our technical acumen and affirms our ability to navigate the complexity of carrier IT environments amidst ever-tightening security demands. This capacity to seamlessly integrate with such intricate systems is not just a competitive edge; it often becomes a decisive factor for carriers like SoftBank, who choose Synchronoss to mitigate the excessive complexity and time investment required for internal solution development.
Jeff Miller: This approach enables operators to select services, such as generative AI to fine tune their customer offerings, thereby driving subscriber growth revenue growth and customer retention.
Jeff Miller: The successful deployment of our technology with Softbank also demonstrates our technical acumen and affirms our ability to navigate the complexity of carrier it environments amidst ever tightening security demands.
Jeff Miller: Capacity to seamlessly integrate with such intricate systems is not just a competitive edge.
Jeff Miller: Often becomes a decisive factor for carriers like Softbank, who choose synchronous to mitigate the excessive complexity and time investment required for internal solution development.
Jeff Miller: Moreover, integrating our solutions into customers' My Account applications, such as My Verizon or My AT&T, is a major step for establishing a successful route to broader adoption across various operating systems. This strategy has the potential to foster increased user engagement with the cloud as offerings get increased visibility and accessibility. We are continuously working to accelerate these types of integrations so that we take advantage of opportunities to facilitate further penetration into the iOS market.
Jeff Miller: Moreover, integrating our solutions into customers my account applications, such as my Verizon or my AT&T is a major step for establishing a successful route to broader adoption across various operating systems.
Jeff Miller: This strategy has the potential to foster increased user engagement with cloud as offerings get increased visibility and accessibility.
Jeff Miller: We're continuously working to accelerate these types of integrations. So that we take advantage of opportunities to facilitate further penetration into the iOS market.
Jeff Miller: These technology-focused advancements support our third strategic priority of expanding our global customer base. Our presence at major industry events like CES and Mobile World Congress has accelerated our discussions and connections in our healthy pipeline. We're progressing discussions across various markets, including with global network operators and telecom providers. In addition to meeting with new prospects, we're maintaining strong relationships with former Messaging and NetworkX customers, who've already experienced our capabilities and quality of service.
Jeff Miller: These technology focused advancements support our third strategic priority of expanding our global customer base.
Jeff Miller: Our presence at major industry events, like CES and mobile World Congress has accelerated our discussions in connections and our healthy pipeline.
Jeff Miller: We're progressing discussions across various markets, including with global network operators and telecom providers. In addition to meeting with new prospects, we're maintaining strong relationships with former messaging and network X customers who've already experienced our capabilities and quality of service.
Jeff Miller: As we pursue these opportunities, service providers are increasingly recognizing our value as a revenue generator and a churn reducer. We are encouraged by our strong start to 2024 and expect that the benefits of our cloud business model will continue to materialize as we execute our strategy. We're confident that our focused efforts will sustain our performance and deliver long-term value to our shareholders. With that, I'll now pass the call to Lou, who will provide a detailed overview of our financial performance and share our outlook for the remainder of 2024. Lou?
Jeff Miller: As we pursue these opportunities service providers are increasingly recognizing our value as a revenue generator and a churn reducer.
Lou: We are encouraged by our strong start to 2024 and expect that the benefits of our cloud business model will continue to materialize as we execute our strategy.
Lou: We're confident that our focused efforts will sustain our performance and deliver long term value to our shareholders.
Lou: With that I will now pass the call to Luke who will provide a detailed overview of our financial performance and share our outlook for the remainder of 2020 for Luke.
Lou Ferraro: Lou, thanks, Jeff, and good afternoon, everyone. The benefits of our transformation are now being reflected in our financial results. Our financial flexibility is the strongest it has been in years, allowing us to simultaneously meet our operational goals and optimize our capital structure. With that, let's begin with some of our key performance indicators, which serve as leading success metrics for the business.
Lou: Luke Thanks, Jeff and good afternoon, everyone.
Lou Ferraro: The benefits of our transformation are now being reflected in our financial results.
Lou Ferraro: Our financial flexibility is the strongest it has been in years, allowing us to simultaneously meet our operational goals and optimize our capital structure.
Lou Ferraro: Quarterly recurring revenue was 91.1% of total revenue, which is an improvement from 88% of total revenue in Q4 of 2023 and 87.9% in the first quarter of last year. We recorded year-over-year cloud subscriber growth of approximately 7% in Q1. The results in the quarter reflect our growing base of subscribers and the elongated smartphone upgrade cycle, which now exceeds 3.5 years. We anticipate subscriber growth to continue in the high single digits to the old double digits in 2024.
Lou Ferraro: With that let's begin with some of our key performance indicators, which serve as leasing success metrics for the business.
Lou Ferraro: Quarterly recurring revenue was 91, 1% of total revenue.
Lou Ferraro: There is an improvement from 88% of total revenue in Q4 of 2023 and 87, 9% in the first quarter of last year.
Lou Ferraro: We recorded year over year cloud subscriber growth of approximately 7% in Q1 the.
Lou Ferraro: The results in the quarter reflect our growing base of subscribers and the elongated smartphone upgrade cycle, which now exceeds three five years.
Lou Ferraro: We anticipate subscriber growth to continue in the high single to low double digits in 2024.
Lou Ferraro: Turning now to our financial results for the first quarter of March 31st, 2024. Total revenue in the first quarter increased to $43 million from $42 million in the prior year period. The revenue performance was the result of growth in cloud subscribers. Gross profit in the first quarter increased 5.1% to $28.7 million, 66.9% of total revenue, from $27.3 million, 65% of total revenue in the prior year period. Gross margins increased as a result of post-divestiture measures taken to streamline operations, resulting in a lower cost of revenue.
Lou Ferraro: Turning now to our financial results for the first quarter ended March 31 2024.
Lou Ferraro: Total revenue in the first quarter increased to $43 million from $42 million in the prior year period. The revenue performance was the result of growth in cloud subscribers.
Lou Ferraro: Gross profit in the first quarter increased five 1% to $28 7 million 66, 9% of total revenue from $27 3 million, 65% of total revenue in the prior year period.
Lou Ferraro: Gross margins increased as a result of post divestiture measures taken to streamline operations, resulting in lower cost of revenues.
Lou Ferraro: First quarter income from operations was $4.6 million, a significant improvement from a loss of $2 million in the prior year period. This increase was primarily due to the rise in revenue coupled with continued expense management and post-investiture measures taken to streamline operations. Net income in Q1 was $2.3 million or $0.23 per share, a significant improvement compared to a loss of $13.4 million or $1.39 per share in Q1 of 2023. However, net loss from discontinued operations was $2.3 million or $0.25 per share in the prior year period.
Lou Ferraro: Fourth quarter income from operations was $4 6 million a significant improvement from a loss of $2 million in the prior year period.
Lou Ferraro: This increase was primarily due to the rise in revenue coupled with continued expense management and post divestiture measures taken to streamline operations.
Lou Ferraro: Net income in Q1 was $2 3 million or 23 per share a significant improvement compared to a loss of $13 4 million or a dirty dollars 39 per share in Q1 of 2023.
Lou Ferraro: Net loss from discontinued operations was $2 3 million or 25 per share in the prior year period.
Lou Ferraro: In Q1, Adjusted EBITDA improved 78% to $10.9 million, or 25.4% of total revenue, up from $6.1 million or 14.5% of total revenue in the prior year period. Moving on to the balance.
Lou Ferraro: In Q1, adjusted EBITDA improved 78%.
Lou Ferraro: $10 9 million.
Lou Ferraro: 25, 4% of total revenue.
Lou Ferraro: Up from $6 1 million or 14, 5% of total revenue in the prior year period.
Lou Ferraro: Cash and cash equivalents were $19.1 million at March 31, 2024, compared to $24.6 million at December 31, 2023. In Q1, our free cash flow improved to negative $3.3 million, improving it from negative $4.2 million in the same period last year. Similarly, our adjusted free cash flow rose to $600,000 compared to a negative $100,000 a year earlier.
Lou Ferraro: Moving onto the balance sheet.
Lou Ferraro: Cash and cash equivalents were $19 1 million at March 31, 2024, compared to $24 6 million.
Lou Ferraro: Number 31 2023.
Lou Ferraro: In Q1, our free cash flow improved to negative $3 3 million an improvement from negative $4 2 million in the same period last year.
Lou Ferraro: Similarly, our adjusted free cash flow rose to $600000 compared to a negative $100000 previously.
Lou Ferraro: In Q1, we made our final payment to the SEC related to the financial restatement that the company completed in 2018. With this payment behind us, we expect a natural increase of $4.8 million in our 2024 cash flow. The first quarter historically sees higher CAS usage due to annual employee and vendor commitment, a pattern we expected and managed to improve upon compared to past performance. With this obligation behind us and the favorable impact of our post-divestiture cost restructuring, we are on a path to free cash flow for 2020. The company did not receive any additional federal tax refunds during the period, leaving its remaining balance due at approximately $28 million.
Lou Ferraro: In Q1, we made our final payment to the SEC related to the financial restatement that the company completed in 2018.
Lou Ferraro: With this payment behind us.
Lou Ferraro: We expect a natural increase of $4 8 million in our 2020 for cash flow.
Lou Ferraro: The first quarter historically sees higher cash usage due to annual employee and vendor commitments a pattern, we expected and managed to improve upon compared to past performance.
Lou Ferraro: With this obligation behind us and the favorable impact of our post divestiture cost restructuring, we're on a path to free cash flow for 2024.
Lou Ferraro: The company did not receive any additional federal tax refunds during the period, leading its remaining balance due at approximately $28 million.
Lou Ferraro: Material progress was made during the quarter towards completion of the process to receive the tax refund, including the completion of the audit portion of the process. The company expects the remaining steps, largely consisting of documentation and committee reviews, to complete it over the coming months and lead to receipt of the tax refund shortly thereafter. Our current estimate for receipt of this refund, based upon communications with the Internal Revenue Service, is later in the second half of 2024. Once we receive the refund, we plan to use those funds to further pay down our outstanding debt. Moving to Gaia.
Lou Ferraro: Material progress was made during the quarter towards completion of the process to received the tax refund, including the completion of the audit portion of the process.
Lou Ferraro: The company expects the remaining steps largely consisting of documentation and committee reviews to completed over the coming months and lead to receipt of the tax refund shortly thereafter.
Lou Ferraro: Our current estimate for receipt of this refund based upon communications with the internal revenue service is later in the second half of 2024.
Lou Ferraro: Once we receive the refund we plan to use those funds to further pay down our outstanding debt.
Lou Ferraro: As we continue to navigate through 2024, our outlook remains unchanged from what we communicated last quarter. We still anticipate the continuation of positive trends experienced with our customers throughout 2023 and into the first quarter. The addition of SoftBank to our portfolio, along with the expiration of certain payment obligations, and the removal of other general costs in Q1, further bolsters our expectation of positive net cash. We remain confident in achieving at least $10 million in net cash flow for 2024, driven by the superior revenue-to-cash conversion capabilities of our stand-alone cloud business.
Lou Ferraro: Moving to guidance as we continue to navigate through 2024, our outlook remains unchanged from what we communicated last quarter.
Lou Ferraro: We still anticipate the continuation of positive trends experienced with our customers throughout 2023 and into the first quarter.
Lou Ferraro: The addition of Softbank to our portfolio along with the exploration of certain payment obligations and the removal of other general cost in Q1.
Lou Ferraro: Further bolster our expectation of positive net cash flow.
Lou Ferraro: We remain confident in achieving at least $10 million and net cash flow for 2024, driven by the superior revenue to cash conversion capabilities of our Standalone cloud business.
Lou Ferraro: As we've already indicated we continue to expect cloud subscriber growth to be in the high single digit to low double digit range throughout 2024.
Lou Ferraro: As we've already indicated, we continue to expect cloud subscriber growth to be in the high single-digit to low double-digit range throughout 2021. For the physical year ended December 31st, 2024, we are reviewing our GAAP guidance revenue guidance, our guidance for GAAP revenue to range between $170 and $175 million, or a range of 5% to 8% growth year over year. Our adjusted EBITDA guidance also remains consistent with previous communications and is expected to range between $42 million and $45 million in 2024, aligning with our targeted margin.
Lou Ferraro: For the physical year ended December 31, 2024, we are reiterating our GAAP guidance revenue guidance for GAAP revenue to range between 170, and $175 million or a range of 5% to 8% growth year over year.
Speaker Change: Our adjusted EBITDA guidance also remains consistent with previous communications and is expected to range between $42 million and $45 million in 2020 for aligning with our targeted margin range I'll now turn the call over to the operator for Q&A. Thank you very much.
Operator: I'll now turn the call over to the operator for Q&A. Thank you very much. Thank you. At this time, the company requests that each participant limit their comments to one question and one.
Operator: Thank you. At this time, we'll open the line for questions. The company requests that each participant limit their comments to one question and one follow-up. As a reminder, to ask a question, you will need to press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. Please stand by while we compile the Q&A roster. Our first question comes from Mike Latimore with Northland Capital. Please go ahead.
Speaker Change: Thank you at this time, we'll open the line for questions. The company requests that each participant limit their comments to one question and one follow up as a reminder to ask a question you will need to press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby, while we compile the Q&A roster.
Operator: Okay.
Operator: Okay.
Aditya Dagaonkar: Hey, hi, this is Aditya on behalf of Mike Latimore. Could you give some color on what kind of gross margin number we could expect for the year?
Operator: Our first question comes from Mike Latimore with Northland Capital. Please go ahead.
Aditya Dagaonkar: Hi, This is Mike.
Speaker Change: Mike Lattimore.
Aditya Dagaonkar: Could you give some color on what kind of gross margin number could we expect for the year.
Lou Ferraro: Yeah, we've given indications as we set expectations for 2024 that we expect our gross margins to be in the 75% plus range. As you can see, based on the execution of our performance, we delivered that in Q1, and we expect that type of performance to continue throughout the year.
Speaker Change: Yes, we've given indications as we set expectations for 2024 that we expect our gross margins to be in the 75% plus range as you can see based on the execution of our performance. We've delivered that on Q1, and we expect that type of performance to continue throughout the year.
Lou Ferraro: Just note that that's our adjusted gross margin basis, not our gap gross margin. Yeah, on a gap basis, of course, this quarter we reported 67 percent, so you are correct. Thank you for the clarification.
Lou Ferraro: Just note that that's our adjusted gross margin basis, not our GAAP gross margin basis on a GAAP basis of course this quarter, we reported 67% so.
Speaker Change: Youre correct. Thank you for the clarification.
Aditya Dagaonkar: Got it. And could you also give some color on the ARC pool? How do you expect the ARC pool to be for the rest of the year?
Speaker Change: Got it and could you also give some color on the auto pool.
Aditya Dagaonkar: How do you expect to be up.
Aditya Dagaonkar: For the rest of the year.
Aditya Dagaonkar: Okay.
Jeff Miller: revenue per user for our customer base. We expect it, by and large, to be about the same participation that we've had in the past. We don't divulge the details of any particular consumer contract, but as you can see with the steady growth in subscribers, we continue to expect that ARPU is going to stay on that track and result in continuous growth overall in revenue. And that growth in revenue should be right in the range, as Lou just reiterated, somewhere between 5 and 8 percent, and we're off to a strong start based on our performance for Q1.
Aditya Dagaonkar: In terms of our.
Aditya Dagaonkar: Revenue per user for our customer base, we expect it by and large yes about the same participation that we've had in the past.
Jeff Miller: We don't divulge the details of any particular consumer contract.
Jeff Miller: But as you can see with the steady growth in subscribers. We continue to expect that that <unk> is going to stay on that track and.
Jeff Miller: <unk> continuous growth overall in revenue.
Jeff Miller: And that growth in revenue will should be right in the range as Luke just to reiterate it somewhere between 5% and 8%.
Jeff Miller: And we're off to a strong start based on our performance for Q1.
Jeff Miller: Got it. Thank you. Sure. Thank you.
Speaker Change: Got it. Thank you sure. Thank you.
Operator: Thank you. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. One moment for our next question. Our next question comes from Matt Schwartz with Mays Investments. Please go ahead.
Speaker Change: Thank you as a reminder to ask a question you will need to press star one on your telephone and wait for your name to be announced one moment for our next question.
Operator: Our next question comes from Matt Schwartz with Maze investments. Please go ahead.
Matt Schwartz: Hey guys, how are you? It's nice to talk to you.
Matt Schwartz: Hey, guys how are you.
Matt Schwartz: Thanks for taking my question. You talked about, and in the release, that you're actively pursuing strategies to decrease the cost of the capital structure. Can you, is that just using the $28 million tax return, you know, to pay down the preparations, or is it another strategic move, or are you evaluating something bigger here, you know, ahead of future maturity?
Matt Schwartz: Alright, Hey, Matt.
Matt Schwartz: And I can talk to you. Thanks for taking my question.
Matt Schwartz: You talked about.
Matt Schwartz: And the relief that you are actively pursuing strategies to decrease that caught the cap the capital structure.
Matt Schwartz: Is that just using that $28 million tax return to pay down that perhaps are.
Matt Schwartz: Or or another strategic move or are you evaluating.
Matt Schwartz: Something something bigger here.
Matt Schwartz: Near term maturities.
Lou Ferraro: Hey Matt, it's Lou.
Matt Schwartz: Hey, Matt It's Luke nice to speak to you and thanks for the question.
Lou Ferraro: So two part answer Matt number one.
Lou Ferraro: <unk> for us to improve our.
Lou Ferraro: Our debt structure, our capital structure.
Lou Ferraro: Is the refund from the federal government that we anticipate the $28 million. However, we are looking at our capital structure right now from the advantageous position of we don't need to do anything right now with the cash flow generation from the business. So it is an opportune time to look at everything and we are doing that.
Lou Ferraro: Nice to speak to you and thanks for the question. So, a two-part answer, Matt. Number one, the shortest path for us to improve our debt structure, our capital structure, is the refund from the federal government that we anticipate, $28 million. However, we are looking at our capital structure right now from the advantageous position that we don't need to do anything right now with the cash flow generation from the business. So, it's an opportune time to look at everything, and we are doing that currently.
Lou Ferraro: Currently.
Lou Ferraro: Okay, great. And then that leads to my second question, which is free cash flow. So you talked about 10 million plus in 24, and you made some comments in the release that you anticipate further improvements in 2025. And I know you highlighted the FEC payment. And I was wondering, um, a couple of things. If you could just talk about what else gives you confidence about the 2025 free cash flow?
Speaker Change: Okay great.
Lou Ferraro: And that leads to my second question, which is.
Lou Ferraro: The free cash flow, so you're talking about $10 million plus in 'twenty four.
Lou Ferraro: And you made some comments in the release I anticipate further improvement in 'twenty, five and I know you highlighted the SEC.
Speaker Change: Hey, Matt and I was wondering.
Lou Ferraro: A couple of things if you could just talk about.
Lou Ferraro: What else gives you confidence that 2025 free cash flow.
Lou Ferraro: Should be higher than 24, maybe walk through. I know you talked about SEC, but I think there's some other things as well on the legal side and anything else you want to highlight. And then also, you talked about the revenue-to-cash conversion. Can you talk about what level you think you can run at in 2025 or even 2024 there?
Lou Ferraro: Should be higher than 24, maybe walk through.
Lou Ferraro: I know you talked about server I think theres, some other things as well.
Lou Ferraro: On the legal side and anything else you want to highlight and then also you talk about the revenue to cash conversion.
Lou Ferraro: Can you talk about what level you think you can run at.
Lou Ferraro: In 2025, or even even 2024 there yes.
Jeff Miller: Yeah, let's go to first what are the drivers for continued expectations of growth on our free... You highlighted a number of them, but it's going to first start with revenue growth. The continuation and expectation of growth in subscribers will continue to lead to revenue growth on a year-over-year basis. All of our big three customers and most of our customers across the board are all growing. That's a great foundation upon which to build, and that's with the existing base that still has many opportunities to continue to grow in penetration. Because, as you may recall, we have among the customers already under contract over 400 million subscribers represented by those companies, and today we're just over 10 million subscribers, so plenty of opportunities for growth there.
Jeff Miller: Yes.
Jeff Miller: Go to first what are the drivers for continued expectations of growth in our free cash flow you highlighted a number of them, but it is going to first start with revenue growth. The continuation of an expectation of growth in subscribers will continue to lead to revenue growth on a year over year basis, all of our big three customers in most of our customers across.
Jeff Miller: The board are all growing.
Jeff Miller: As a great foundation upon which to build and that's with the existing base that still has many opportunities to continue to grow in penetration because as you may recall.
Jeff Miller: We have among the customers already under contract over 400 million subscribers represented by those companies and today were just over 10 million subscribers, so plenty of opportunities for growth there.
Jeff Miller: You also highlighted a couple of other areas. Yes, certainly the expected lower cost because we will have no SEC penalty fees to be paid in 2025, and we expect our legal expenses will also go down further because we have been defending some individuals still related to the financial restatement, and that has progressed in a favorable direction such that we anticipate those costs going down materially in 2024. Those are the primary drivers.
Jeff Miller: You also highlighted a couple of other areas, yes, certainly we expect to lower costs, because we will have no SEC penalties to be paid in 2025.
Jeff Miller: We expect our legal expenses will also further go down because we have been defending some individuals still related to the financial restatement.
Jeff Miller: And that has progressed in a favorable direction.
Jeff Miller: Such that we anticipate those costs going down materially in 2025.
Jeff Miller: In terms of overall indicators, we're not going to get ahead of ourselves, but we feel very good about where we stand on delivering double digits of positive free cash flow this year. And with the revenue growth combined with lower expenses and how we manage operating expenses in general, we think that is going to go to a more substantial number well into 2020. And Matt, the only thing I'd add to that and Q1 was a
Jeff Miller: Those are the primary drivers in terms of overall indicators were not going to get ahead of ourselves, but we as we said we feel very good about where we stand on delivering now double digits.
Jeff Miller: Positive free cash flow this year and with the revenue growth combined with lower expenses and how we manage operating expenses in general we think that is going to go to a more substantial number well into 2025.
Lou Ferraro: And Matt, the only thing I'd add to that and Q1 was a pivotal foundation quarter for us to put in place in order to
Jeff Miller: And Matt the only thing I'd add to that in Q1 was a pivotal foundation quarter for us to put in place in order to achieve that.
Operator: As a reminder, to ask a question, you will need to press star 1 1 on your telephone and wait for your name to be announced. We'll move on to our next question. I'm showing no further questions at this time. I'll now turn the call back over to Mr. Miller for his closing remarks. Thank you.
Speaker Change: Thank you.
Lou Ferraro: As a reminder to ask a question you will need to press star one on your telephone and wait for your name to be announced.
Operator: For our next question.
Jeff Miller: Thank you. And before we wrap up today's call, I want to acknowledge the Synchronos team for your dedication and your diligent effort. Your work has made our company more agile and better positioned for strong financial performance in the years ahead. I also thank our shareholders for your continued support through our transformation. We are focused on leveraging this momentum to generate returns in the upcoming quarters and years ahead. Thank you. Operator, back to you.
Operator: I'm showing no further questions at this time I will now turn the call back over to Mr. Miller for his closing remarks. Thank you.
Speaker Change: And before we wrap up today's call.
Jeff Miller: Want to acknowledge the synchronous team for your dedication and your digital diligent efforts. Your work has made our company more agile and better positioned for strong financial performance in the years ahead.
Jeff Miller: I also thank our shareholders for your continued support through our transformation. We are focused on leveraging this momentum to generate returns in the upcoming quarters and years ahead.
Speaker Change: Thank you operator back to you.
Operator: Before we conclude today's call, I'd like to provide Synchronoss' safe harbor statement that includes important cautions regarding forward-looking statements made during this call. During this call, management discussed certain factors that are likely to influence the company's business going forward. Any factors that are discussed today that are not historical, particularly comments regarding prospects and market opportunities, should be considered forward-looking statements within the meaning of applicable securities laws. Such forward-looking statements include comments about the company's plans and expectations of future performance.
Speaker Change: Before we conclude today's call I'd like to provide synchronous. This safe Harbor statement that includes important cautions regarding forward looking statements made during this call.
Operator: During this call management discuss certain factors that are likely to influence the company's business going forward.
Operator: Forward-looking statements are subject to a number of risks and uncertainties, which could cause actual results to differ materially. All listeners are encouraged to review the company's SEC filings, including its most recent 10-K and 10-Q, for a description of these risks.
Operator: The factors that are discussed today that are not historical particularly comments regarding prospects and market opportunities should be considered forward looking statements within the meaning of applicable securities laws.
Operator: These forward looking statements include comments about the Companys plans and expectations of future performance forward looking statements are subject to a number of risks and uncertainties, which could cause actual results to differ materially.
Operator: Listeners are encouraged to review the company's SEC filings, including its most recent 10-K and 10-Q for a description of these risks statements made during this call are made as of today and the company does not undertake any obligation to update or revise any such forward looking statements, whether as a result of new information future events changes in expectations or otherwise.
Operator: Statements made during this call are made as of today, and the company does not undertake any obligation to update or revise any such forward-looking statements, whether as a result of new information, future events, changes in expectations, or otherwise. Please note also that throughout today's call, management discussed certain non-GAAP financial measures, such as adjusted EBITDA. Although non-GAAP measures are derived from GAAP measures, adjusted EBITDA does not necessarily equate to cash generated by operations, as it does not account for such items as deferred revenue or the capitalization of software development.
Operator: Please note also that throughout today's call management discuss certain non-GAAP financial measures such as adjusted EBITDA. Although non-GAAP measures are derived from GAAP measures adjusted EBITDA does not necessarily equate to cash generated by operations as it does not account for such items as deferred revenue or the capitalization of software development today's earnings release.
Operator: Today's earnings release describes the differences between the company's non-GAAP and GAAP reporting and presents a reconciliation for periods reported in the release. Thank you for joining us today for Synchronous Technology's first quarter 2024 earnings conference call. You may now disconnect.
Operator: The differences between the company's non-GAAP and GAAP reporting and presents a reconciliation for periods recorded in the release. Thank you for joining us today for synchronous Technologies' first quarter 2024 earnings Conference call you may now disconnect.
Operator: Okay.
Operator: [music].
Operator: Okay.
Operator: [music].