Q4 2024 Synchronoss Technologies Inc Earnings Call
Greetings and welcome to the synchronous technologies fourth quarter 2024 earnings Conference call.
At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation.
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A reminder, this conference is being recorded.
Brian Curriculum: Now my pleasure to introduce your host Brian curriculum of Investor Relations. Thank you you may begin.
Speaker Change: Thanks, Matt Good afternoon, and welcome to the synchronous technologies fourth quarter and full year 2024 earnings conference call.
Ryan Gardella: Good afternoon. Welcome to the Synchronos Technologies fourth quarter and full year 2024. Joining us today are Synchronoss Technologies President and CEO, Jeff Miller, and CFO, Louis Ferraro. By now, everybody should have access to the company's fourth quarter and full year 2024 earnings press release issued this afternoon, which is available on the Investor Relations section of our website. Today's call will begin with remarks from Jeff and Lou, after which we will host a question and answer session.
Speaker Change: Today, our secret Technology's, President and CEO, Jeff Miller, and CFO Lewis for Us by now everybody should have access to the company's fourth quarter and full year 2024 earnings press release issued this afternoon, which is available on the Investor Relations section section of our website today's call will begin with remarks from Jeff and Lou After which we'll host a question and answer.
Speaker Change: Before we conclude I'll provide the necessary cautions regarding forward looking statements made by management during this call.
Ryan Gardella: Before we conclude, I'll provide the necessary cautions regarding the forward-looking statements made by management during this. 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.
Speaker Change: 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.
Jeffrey Miller: Now, I'd like to turn the call over to Jeff Miller, President and CEO. Thank you, Ryan. Welcome, everyone, and thank you for joining today's call. 2024 was a landmark year for Synchronoss, one which saw the completion of our strategic transformation to a high-margin global cloud solutions provider that is generating positive free cash flow and approximately 29% adjusted EBIT market. We're pleased to have concluded 2024 with 6% year-over-year subscriber growth in the fourth quarter. has contributed to a full-year revenue of $173.6 million, a 5.7% increase year-over-year, and above the midpoint of our outlook. We also achieved over $50 million of adjusted EBITDA for the full year, an increase of approximately 61% year-over-year and above the high end of our revised annual outlook range.
Jeff Miller: Now I'd like to turn the call over to Jeff Miller, President and CEO of cigarettes.
Speaker Change: Thank you Ryan and welcome everyone and thank you for joining today's call.
Speaker Change: 'twenty 'twenty four was a landmark year for synchronous one which saw the completion of our strategic transformation to a high margin global cloud solutions provider that is generating positive free cash flow and approximately 29% adjusted EBIT margins.
Speaker Change: We're pleased to have concluded 'twenty 'twenty, four with 6% year over year subscriber growth in the fourth quarter, which.
Speaker Change: Which contributed to a full year revenue of $173 $6 million of.
Speaker Change: Five 7% increase year over year and above the midpoint of our outlook.
Speaker Change: We also achieved over $50 million of adjusted EBITDA for the full year in.
An increase of approximately 61% year over year and above the high end of our revised annual outlook range.
Jeffrey Miller: This improved profitability resulted in more than $20 million in positive income from operations and generation of $8.8 million in net cash flow. Our teamwork has worked hard and diligently to beat expectations and I'm proud of their efforts that they've put forth to achieve it. Our transformation to a global cloud solutions provider has resulted in stable recurring revenue model, now with 90% of our revenues, of total revenues greater in the recurring revenue bucket, and approximately 30% adjusted EBITDA margins in the fourth quarter, and free cash flow generation. In addition to our financial results, during the quarter we signed two significant multi-year contract extensions with existing customers.
Speaker Change: This improved profitability resulted in more than $20 million in positive income from operations and generation of $8 $8 million and net cash flow.
Speaker Change: Our team work has worked hard and diligently to beat expectations and I'm proud of their efforts that they put forth to achieve it.
Speaker Change: Our transformation to a global cloud solutions provider has resulted in stable recurring revenue model now with 90% of our revenues of total revenues greater in the recurring revenue bucket and approximately 30% adjusted EBITDA margins in the fourth quarter.
Speaker Change: And free cash flow generation.
Speaker Change: In addition to our financial results during the quarter, we signed two significant multi year contract extensions with existing customers AT&T N S. F R.
Jeffrey Miller: AT&T, and SFR. The successful three-year extension of the AT&T contract through 2027 marks a key milestone and that we now have over 90% of our 2025 projected revenue under multi-year contract with global tier one customers, further strengthening the foundation of our business and making us poised for future growth. As a reminder, in 2023, we extended our contractual relationship with Verizon through the year 2030. that year also kicked off the five-year agreement with SoftBank, which carries into 2028. We also introduced additional enhancements to our cloud platform during the quarter, which we've showcased at this year's Consumer Electronics Show and last week's global industry event known as Mobile World Congress in Barcelona.
Speaker Change: The successful three year extension of the AT&T contract through 2027 marks a key milestone for us and that we now have over 90% of our 2025 projected revenue under multi year contract with global tier one customers further strengthening the foundation of our business and making us poised for future growth.
Speaker Change: As a reminder, in 2023, we extended our contractual relationship with Verizon through the year 2030.
Speaker Change: That you're also kicked off the five year agreement with Softbank, which carries into 2028.
Speaker Change: We also introduced additional enhancements to our cloud platform during the quarter, which we showcased at this year's consumer electronics show and last week's global industry event known as mobile World Congress in Barcelona.
Speaker Change: Leveraging AI and machine learning, we enhance the presentation of memories for our subscribers inviting them to revisit and share their most precious moments in the form of a slideshow with atmospheric sound tracks, which also increases user engagement with our platform.
Jeffrey Miller: Leveraging AI and machine learning, we enhance the presentation of memories. For our subscribers, inviting them to revisit and share their most precious moments in the form of a slideshow with atmospheric soundtracks, which also increases user engagement with our platform. Our performance in the fourth quarter was the result of a cloud focus of our business and the execution of our full team. delivered year-over-year revenue growth and generated significant value for our key stakeholders.
Speaker Change: Our performance in the fourth quarter was a result of our cloud focus of our business and the execution of our full team.
Speaker Change: Which delivered year over year revenue growth and generated significant value for our key stakeholders.
Jeffrey Miller: Today I also want to spend some time talking about the future of our business. Growth Prospects, and our 2025 financial guidance. First, let's discuss the growth opportunities with our current customers. where we continue to see significant opportunity to grow organically within the blue chip customer base. We're continuing to work with our operator partners to expand the offering of our personal cloud solution to end users outside of the traditional phone upgrade cycle. By drawing upon a variety of relevant customer channels, including retail, digital, prepaid or value brands, and the small and medium business market, or SMB, we're creating new inflection points in the customer journey to ensure that Synchronoss' white label solution remains front and center for our customers and users throughout their relationship with the operator.
Speaker Change: Today I also want to spend some time talking about the future of our business our growth prospects and our 2025 financial guidance.
Speaker Change: First let's discuss the growth opportunities with our current customers, where we continue to see significant opportunity to grow organically within the blue chip customer base.
Speaker Change: We're continuing to work with our operator partners to expand the offering of our personal cloud solution to end users outside of the traditional phone upgrade cycle.
Speaker Change: By drawing upon a variety of relevant customer channels, including retail digital prepaid or value brands and the small and medium business market or SMB, we're creating new inflection points in the customer journey to ensure that synchronous as white label solution remains front and center for our customers and users.
Speaker Change: Throughout their relationship with the operator.
Jeffrey Miller: We've seen positive early indicators of success here, including increased take rates through retail channels across all of our carrier partners, and are confident that continued expansion of these efforts will drive subscriber adoption for our personal cloud solution. AT&T is demonstrating excellent subscriber growth momentum following their recent contract extension. In addition to expanding our personal cloud solution offering outside the traditional upgrade cycle, we've taken steps to improve the availability and ease of adoption of their offering in the phone onboarding process at AWS. and we're experiencing very positive results from this improvement. Following the recent launch of the new Samsung Galaxy product line, we're seeing dramatically improved frequency of cloud offer presentment and higher take-home costs.
Speaker Change: We've seen positive early indicators of success here, including increased take rates through retail channels across all of our carrier partners and are confident the continued expansion of these efforts will drive subscriber adoption for our personal cloud solution.
Speaker Change: AT&T is demonstrating excellent subscriber growth momentum following their recent contract extension.
Speaker Change: In addition to expanding our personal cloud solution offering outside the traditional upgrade cycle, we've taken steps to improve the availability and ease of adoption of their offering and the phone onboarding process at AT&T.
Speaker Change: And we're experiencing very positive results from this improvement.
Speaker Change: Following the recent launch of the new Samsung Galaxy product line, we're seeing dramatically improved frequency of cloud offer presentment.
Speaker Change: And higher take rates.
Speaker Change: We also have exciting plans to continue our growth and adoption with Softbank in Japan, bringing.
Jeffrey Miller: We also have exciting plans to continue our growth and adoption with SoftBank in Japan. bringing Ancient Data Box to more subscribers throughout their retail and digital channels. were encouraged at the early pace of cloud subscriber adoption during the first full year of operation. Yet our penetration with SoftBank's mobile customers is less than two percent. And therefore, we believe there is a large and growing opportunity in Japan to add to our subscriber base.
Speaker Change: Bringing engine data box to more subscribers throughout their retail and digital channels.
Speaker Change: We're encouraged at the early pace of cloud subscriber adoption during the first full year of operation yet or she was softbank mobile customers is less than 2%.
Speaker Change: And therefore, we believe there is a large and growing opportunity in Japan to add to our subscriber base.
Speaker Change: Now, let's talk about our attention to turn our attention to Verizon who subscriber base represents a significant number of synchronous personal cloud users.
Jeffrey Miller: Now let's turn our attention to Verizon, whose subscriber base represents a significant number of Synchronos personal cloud users. In the fourth quarter, we continue to invest heavily in sales and training measures, which have been paying dividends in new subscriber additions. During this time, we launched incentives through Verizon Retail Channels, which generated significant improvements in attach rates and in-store Verizon Cloud App downloads, which has translated to positive momentum that has continued in the first quarter. Verizon has also been shifting their strategy for their cloud offering to attract premium subscribers through their My Plan perks offering in recognition of the value that the personal cloud solution provides.
Speaker Change: In the fourth quarter, we continued to invest heavily in sales and training measures, which have been paying dividends in new subscriber additions.
Speaker Change: During this time, we launched incentives through Verizon retail channels, which generated significant improvements in attach rates and in store Verizon cloud App downloads, which has translated to positive momentum that has continued in the first quarter.
Speaker Change: Verizon has also been shifting their strategy for their cloud offering to attract premium subscribers through their my planned perks offering in recognition of the value that the personal cloud solution provides.
Speaker Change: Following many years of bundling our product horizon has now transitioned to selling our personal cloud is one of their highly promoted and most successful perks on a standalone basis within there might plan offerings.
Jeffrey Miller: Following many years of bundling our product, Verizon has now transitioned to selling our personal cloud as one of their highly promoted and most successful perks on a stand-alone basis within their MyPlan office. This has dramatically increased the stickiness and engagement of new premium subscribers who pay monthly for Verizon Cloud. Additionally, Verizon is prioritizing the unlimited cloud offer as the lead customer option. Increasing the average selling price of the solution and placing a spotlight on the compelling economic value of the unlimited offer versus the competition We believe this will be a net positive for our business in 2025 as we work through the natural transition of customers rolling off the bundled plans and opting into individual perk options through MyPerk.
Speaker Change: This is dramatically increased the stickiness and engagement of new premium subscribers, who pay monthly for Verizon cloud.
Speaker Change: Additionally, Verizon is prioritizing the unlimited cloud offer as the lead customer option.
Speaker Change: Increasing the average selling price of the solution and placing a spotlight on the compelling economic value of the unlimited offer versus the competition.
Speaker Change: We believe this will be a net positive for our business in 2020 five as we worked through the national natural transition of customers rolling off the bundled plans and opting into individual PERC options through my plan.
Jeffrey Miller: In aggregate, we're expecting mid-single-digit subscriber growth across our existing customer base in 2025.
Speaker Change: In aggregate, we're expecting mid single digit subscriber growth across our existing customer base in 2025.
Speaker Change: Next let's talk about new customers and prospects.
Jeffrey Miller: Next, let's talk about new customers and process. Our targeted sales efforts in 2024 have yielded a growing number of prospects that are evaluating our personal cloud solution, as they seek new opportunities to drive revenue growth and customer retention. This engagement is providing us increased confidence in the potential to sign additional customer contracts to expand the reach of our global personal cloud solution. While obviously we cannot provide any more information on these prospects until commercial terms and contracts are finalized, we believe that this will provide us with the additional subscribers needed, over time, to achieve our projected double-digit revenue growth in the coming years.
Speaker Change: Our targeted sales efforts in 2024 have yielded a growing number of prospects that are evaluating our personal cloud solution as they seek new opportunities to drive revenue growth and customer retention.
Speaker Change: This engagement is providing us increased confidence in the potential sign just to sign additional customer contracts to expand the reach of our global personal cloud solution.
Speaker Change: Well, obviously, we cannot provide any more information on these prospects until commercial terms and contracts are finalized we believe that this will provide us with the additional subscribers needed overtime to achieve our projected double digit revenue growth in the coming years.
Speaker Change: Now I want to talk about a new go to market strategy to accelerate adoption and global availability of our personal cloud solution, which supports our growth and global goals and objectives.
Jeffrey Miller: Now I want to talk about a new go-to-market strategy to accelerate adoption and global availability of our personal cloud solution. supports our growth goals and objectives. As you know, our business model is currently based on a white label resale of our personal cloud solution to major carriers and home broadband service providers. This model requires a certain level of investment and time to integrate for our carrier partners, which can limit the markets and geographies it's profitable to sell into. During this year's Mobile World Congress event, we announced the general availability of CAPSID. which is our Synchronoss branded personal cloud product that we will be offering to smaller and international operators around the world, including in regions previously where it was not economical to offer the white label solution.
Speaker Change: As you know our business model is currently based on a white label resale of our personal cloud solution to major carriers in home broadband service providers.
Speaker Change: This model requires a certain level of investment and time to integrate for our carrier partners, which can limit the markets and geographies, it's profitable to sell into.
Speaker Change: During this years mobile World Congress event, we announced the general availability of capsule.
Speaker Change: Which is our synchronous branded personal cloud product that we will be offering to smaller and international operators around the world, including in regions previously where it was not economical to offer the white label solution.
Speaker Change: We believe this is a large long term opportunity for synchronous with tens of millions of potential new subscribers being unlocked by knocking down financial obstacles for carriers since it requires no customization or integration to the carriers ecosystem, yet does not sacrifice any of the features or functionality of our white.
Jeffrey Miller: We believe this is a large, long-term opportunity for Synchronoss. Tens of millions of potential new subscribers being unlocked by knocking down financial obstacles for carriers since it requires no customization or integration to the carrier's ecosystem. yet does not sacrifice any of the features or functionality of our white label solution. With Capsule, all a carrier needs to do is agree to offer the service to their subscriber base, and we can onboard those subscribers immediately to the Capsule platform. We've already seen promising initial test results in our partnership with Telkomsel in Indonesia, with thousands of subscribers signing up in just the first couple of months.
Speaker Change: Cable solution.
Speaker Change: With capsule all the carrier needs to do is agree to offer this service to their subscriber base and we can onboard those subscribers immediately to the capsule platform.
Speaker Change: We've already seen promising initial test results and our partnership with telecom sell in Indonesia with thousands of subscribers signing up.
Speaker Change: Just the first couple of months.
Speaker Change: Finally, I want to talk about our 2025 guidance.
Jeffrey Miller: Finally, I want to talk about our 2025 guide. There are two items from 2024 that will affect our year-over-year top-line revenue. First, we have approximately $2 million in professional services revenue from the completion of our SoftBank integration work that we believe will not recur in 2025, and thus should be treated as a one-time contribution to our 2024 results. Second, one of our European customers, BT, was in the middle of a multi-year business rights sizing and transformation. decided to wind down their legacy wireline cloud offering as part of a broader cost reduction effort. This was the result of a business and branding consolidation effort and a deliberate shift in strategy by the customer and does not reflect any dissatisfaction with the performance of our cloud offering.
Speaker Change: There are two items from 'twenty 'twenty, four that will affect our year over year topline revenue growth.
Speaker Change: First we have approximately $2 million and professional services revenue from the completion of our Softbank integration work that we believe will not recur in 2025 and that should be treated as a one time contribution to our 2024 results.
Speaker Change: Second one of our European customers B T. He was in the middle of a multiyear business right sizing and transformation has decided to wind down their legacy wireline cloud offering as part of a broader cost reduction effort.
Speaker Change: This was the result of a business and Brandon consolidation effort and a deliberate shift in strategy by the customer and does not reflect any dissatisfaction with the performance of our cloud offering.
Jeffrey Miller: In fact, during last week's Mobile World Congress, I met with senior leaders of BT on how to leverage our longstanding partnership and collective cloud experience and apply that to their latest brand strategy for broadband and mobile subscribers going forward. BT contributed approximately $6 million in annualized revenue in 2024. That is not expected to continue in 2024. But with recurring revenue representing more than 90% of our 2025 total revenue projection, we're confident in our numbers for the next year and anticipate that the projected subscriber growth will compensate for these two events.
Speaker Change: And flat in fact during last week's mobile World Congress I met with senior leaders of BT on how to leverage our long standing partnership and collective cloud experience and apply that to their latest brand strategy for broadband and mobile subscribers going forward.
Speaker Change: <unk> contributed approximately $6 million in annualized revenue in 2024 that is not expected to continue in 2025.
Speaker Change: But with recurring revenue representing more than 90% of our 2025 total revenue projection, we're confident in our numbers for the next year and anticipate that the projected subscriber growth will compensate for these two events.
Jeffrey Miller: As we move forward through 2025, I'm filled with confidence based upon the early positive signs of accelerated subscriber adoption at AT&T. the expansion of Verizon cloud growth through retail, value, and the SMB channels, and the significant opportunities that exist with only 2% subscriber penetration at software. I'm also encouraged by our active conversations with new cloud customer prospects and look forward to expanding the reach of our cloud platform, including our new capsule offering, and then replicating the success that we've enjoyed with our existing customers. We've taken concrete steps to pivot our business model and emerge as a high-margin, free cash flow positive cloud provider, and believe we are now poised for new customer expansion and continued growth.
Speaker Change: As we move forward through 2025, I'm filled with confidence based upon the early positive signs of accelerated subscriber adoption at AT&T.
Speaker Change: The expansion of Verizon crowd cloud growth through retail value and the SMB channels and the significant opportunities that exist with only 2% subscriber penetration at Softbank.
Speaker Change: I'm also encouraged by our active conversations with new cloud customer prospects and look forward to expanding the reach of our cloud platform, including our new capsule offering and then replicating the success that we've enjoyed with our existing customers.
We've taken concrete steps to pivot our business model and emerge as a high margin free cash flow positive cloud provider.
Speaker Change: And believe we are now poised for new customer expansion and continued growth.
Jeffrey Miller: We're confident in our new business model, our product offering, and strategy, and feel that there is near-term opportunity for growth in our existing customers, our ability to add new customers, and the promising rollout of capital.
Speaker Change: We're confident that our new business model, our product offering and strategy and feel that there is near term opportunity for our growth and our existing customers our ability to add new customers and the promising rollout of capsule.
Louis Ferraro: Now I'd like to pass the call over to Lou for a more detailed review of the financials. Thanks, Jeff, and thanks again to everyone joining us here today. First, I'd like to go over our key performance indicators, which we believe serve as an important benchmark for our company's success. Quarterly recurring revenue was 91% of total revenue in the fourth quarter versus 88% in the prior year period. we recorded year-over-year cloud subscriber growth of 6% in Q4.
Lou: Now I'd like to pass the call over to Lou for a more detailed review of the financials.
Lou: Thanks, Jeff and thanks, again to everyone joining us here today.
Speaker Change: First I'd like to go over our key performance indicators, which we believe serve as an important benchmark for our company's success.
Speaker Change: Quarterly recurring revenue was 91% of total revenue in the fourth quarter versus 88% in the prior year period.
Speaker Change: We recorded year over year cloud subscriber growth of 6% in Q4.
Speaker Change: Turning now to our financial results for the fourth quarter and full year ended December 31 2024.
Louis Ferraro: Turning now to our financial results for the fourth quarter and the full year ended December 31, 2024. Total revenue in the fourth quarter increased to $44.2 million from $41.4 million in the prior year period, an increase of 6.8%. This revenue performance was primarily a result of the growth in cloud subscribers. Adjusted growth profit in the fourth quarter increased 12.7% to $35 million, or 79.3% of total revenue. from $31.1 million and 75.1% of total revenue in the prior year period. Fourth quarter income from operations was $7.3 million, a significant improvement from $2.2 million in the prior year period.
Speaker Change: Total revenue in the fourth quarter increased to $44 2 million from $41 4 million in the prior year period, an increase of six 8%.
Speaker Change: This revenue performance was primarily result of the growth in cloud subscribers.
Speaker Change: Adjusted gross profit in the fourth quarter increased 12, 7% to $35 million or 79, 3% of total revenue.
Speaker Change: From 31.1 million and 75, 1% of total revenue in the prior year period.
Fourth quarter income from operations was $7 3 million a significant improvement from $2 2 million in the prior year period. The increases in adjusted gross profit and income from operations were primarily due to the rise in revenue coupled with continued post divestiture expense management measures taken.
Louis Ferraro: The increases in adjusted growth profit and income from operations were primarily due to the rise in revenue coupled with continued post-divestiture expense management measures taken to streamline operations. Looking at the full year, total revenue increased 5.7% to $173.6 million from $165.2 million in the prior year. For the full year, adjusted gross profit increased 10.5% to $135.7 million or 78.2% of total revenue. up from $122.7 million, or 74.7% of total revenue, in 2023. Income from operations for the full year was up significantly to $21.7 million, compared to a loss from operations of $10.6 million in 2023.
Speaker Change: To streamline operations.
Speaker Change: Looking at the full year total revenue increased five 7% to $173 6 million from $164 2 million in the prior year.
Speaker Change: For the full year adjusted gross profit increased 10, 5% to $135 7 million were 78, 2% of total revenue.
Speaker Change: Up from $122 7 million or 74, 7% of total revenue in 2023.
Speaker Change: Income from operations for the full year was up significantly to $21 7 million compared to a loss from operations of $10 6 million in 2023.
Speaker Change: This change was primarily the result of an increase in revenue combined with a significant year over year decrease in our SG&A expenses.
Louis Ferraro: This change was primarily the result of an increase in revenue combined with a significant year-over-year decrease in our SG&A expenses. As we have discussed on prior calls, while our interest expense line is up sequentially and year over year, this is primarily due to replacing our preferred stock and the associated 14% dividend with a lower interest bearing term limit. When all factors are considered, the term loan financing structure results in a new quarterly interest expense of $4.5 million compared to a combined $5.1 million preferred stock dividend and interest expense in the second quarter of 2022. Additionally, we also expect to benefit from falling interest rates as our financing is based on SOFR.
Speaker Change: As we have discussed on prior calls while our interest expense line is up sequentially and year over year. This is primarily due to replacing our preferred stock and the associated 14% dividend with a lower interest bearing term loan.
Speaker Change: When all factors are considered the term loan financing structure results in a new quarterly interest expense of $4 5 million compared to a combined $5 1 million preferred stock dividend and interest expense in the second quarter of 2024.
Speaker Change: Additionally, we also expect to benefit from falling interest rates as our financing is based on sofa.
Louis Ferraro: Finally, we expect to amortize 2.5% of the loan per quarter, which will result in a $200,000 reduction in interest expense each year at current interest. Net income in Q4 was $7.9 million, or $0.71 per diluted share, as compared to a net loss of $35 million, or $3.56 per diluted share in the prior year period. For the full year, net income was $4.6 million, or $0.43 per diluted share, compared to a net loss of $64.5 million, or $6.62 per diluted share in 2022. In Q4, adjusted EBITDA improved to $13.9 million, representing an adjusted EBITDA margin of 31.4%, up from $10 million and 24.1% adjusted EBITDA margin in the prior year period.
Speaker Change: Finally, we expect to amortize, 2.5% of the loan per quarter, which will result in a $200000 reduction in interest expense each year at current interest rates.
Net income in Q4 was $7 9 million or 71 cents per diluted share as compared to a net loss of $35 million or 3.56 per diluted share in the prior year period.
Speaker Change: For the full year net income was $4 6 million or 43 cents per diluted share compared to a net loss of $64 5 million or $6 62 per diluted share in 2023.
Speaker Change: In Q4, adjusted EBITDA improved to $13 9 million, representing an adjusted EBITDA margin of 31, 4%.
Speaker Change: Up from $10 million and 24, 1% adjusted EBITDA margin in the prior year period.
Speaker Change: For the full year 2024, adjusted EBITDA increased to $60 6 million.
Louis Ferraro: For the full year 2024, adjusted EBITDA increased to $60.6 million. decreased 60.6% to $50.4 million, 29% of total revenue, up from $31.4 million, or 19.1% of total revenue in the prior year. Moving on to the balance sheet, cash and cash equivalents were $33.4 million on December 31st, 2024, compared to $25.2 million as of September 30th, 2024. In the fourth quarter of 2024, free cash flow was $9.1 million, and adjusted free cash flow was $12 million, compared to a negative $4.4 million of free cash flow and positive adjusted free cash flow of $1.4 million in the prior year period.
Speaker Change: Decreased 66% to $50 4 million, 29% of total revenue up from $31 4 million or 19, 1% of total revenue in the prior year.
Speaker Change: Moving on to the balance sheet cash and cash equivalents were $33 4 million on December 31, 2024, compared to $25 2 million as of December.
Speaker Change: At September 32024, and.
Speaker Change: In the fourth quarter of 2020 for free cash flow was $9 1 million and adjusted free cash flow was 12 million compared to a negative $4 4 million of free cash flow and positive adjusted free cash flow of $1 4 million in the prior year period.
Speaker Change: Next I would like to provide an update on our tax refund status.
Louis Ferraro: Next, I would like to provide an update on our tax refund status. Recent events and conversations have resulted in our confidence level increasing materially that we are near the end of this extended and painful process for our shareholders. During the last quarter and the first part of 2025, we have undertook several active steps to increase the pressure on the regulatory bodies that control this process and express the immediate need for action on their part. These efforts appear to have had an impact, and we continue to receive indications from the IRS that solidifies our high level of confidence in receiving the entire tax refund, including accrued interest, in the ensuing months.
Speaker Change: Recent events and conversations have resulted in our confidence level, increasing materially that we are near the end of this extended and painful process for our shareholders. During the last quarter and the first part of 2025, we have undertook several active steps to increase the pressure on the regulatory bodies that control.
Speaker Change: This process and express the immediate need for action on the airports.
Speaker Change: These efforts appear to have and it had an impact and we continue to receive indications from the IRS that solidifies our high level of confidence in receiving the entire tax refund, including accrued interest in the ensuing months.
Louis Ferraro: As a reminder, once we receive the refund, we are obligated under our current term loan to use 50% of the proceeds from the anticipated $28 million IRS tax refund plus half of the applicable interest to prepay a portion of the term loan at par.
Speaker Change: As a reminder, once we receive the refund we are obligated under our current term loan to use 50% of the proceeds from the anticipated $28 million of IRS tax refund plus half of the applicable interest to prepay a portion of the term loan at par.
Louis Ferraro: We'll update the entire financial community as soon as we receive more actionable information.
Speaker Change: We will update the entire financial community as soon as we receive more actionable information.
Louis Ferraro: Moving now to guidance.
Speaker Change: Moving now to guidance, we are providing the following financial outlook ranges for the full year of 2025 for revenue, we expect a range of between 170 $180 million for.
Louis Ferraro: We are providing the following financial outlook ranges for the full year of 2025. For revenue, we expect a range of between $170 and $180 million. For adjusted gross margin, we expect a range of 78% to 80%. For recurring revenue, we expect for this year to be at least 90% of our total revenue. For adjusted EBITDA, we expect a range of between $52 million and $56 million. And for free cash flow, we are expecting between $11 million and $16 million.
Speaker Change: For adjusted gross margin, we expect a range of 78% to 80%.
Speaker Change: For recurring revenue, we expect for this year to be at least 90% of our total revenue.
Speaker Change: For adjusted EBITDA, We expect a range of between 52 and $56 million and for free cash flow, we were expecting between 11 and $16 million. This is not reflective.
Louis Ferraro: This is not reflective of our expected federal tax refund and is purely to be generated by our business operations.
Speaker Change: Of our expected federal tax refund and it's purely to be generated.
Speaker Change: By our business operations.
Ryan Gardella: I'll now turn the call over to the operator for Q and A. Thank you very much for joining and I'll be conducting a question and answer session. If you'd like to ask...
Speaker Change: I'll now turn the call over to the operator for Q&A. Thank you very much for joining us.
Speaker Change: Thank you, we'll now be conducting a question and answer session.
Speaker Change: You'd like to ask a question. Please press star one on your telephone keypad.
Speaker Change: Confirmation tone will indicate your line is in the question queue.
Operator: locate your wine. Star 2 to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Thanks.
Speaker Change: Start to remove yourself from the queue.
Speaker Change: Participants using speaker equipment, it may be necessary to pick up your handset before pressing the snarky.
Speaker Change: One moment please.
Speaker Change: Okay.
Speaker Change: My first question is from Richard Baldry from Roth Capital. Please go ahead.
Speaker Change: Thanks, and can you talk about to what degree you think your cost cutting or efficiency efforts are completed and then and when you look out to next year is there any seasonality we should expect either on the revenue side of the table, our or the Opex side.
Louis Ferraro: Can you talk about to what degree you think your cost cutting or efficiency efforts are completed? And then look out to next year.
Louis Ferraro: Is there any seasonality we should expect either the revenue side of the table or the OPEC side?
Speaker Change: Okay.
Speaker Change: Good afternoon rich excellent question.
Louis Ferraro: Good afternoon, Rich. Excellent question. At this point in time, with the actions that we've taken in the fourth quarter of 2023 and the continued actions we took in 2024, we think our cost-cutting actions are substantially complete. However, we will always continue to look at our cost structure for efficiencies, especially as our technology organization continues to adapt and use more relevant AI technologies in their product development roadmaps.
Speaker Change: At this point in time with the actions that we've taken in the fourth quarter of 2023 and the continued actions we took in 2024.
Speaker Change: We think our cost cutting actions are substantially complete.
Speaker Change: However, we will always continue to look at our cost structure for efficiencies, especially as our technology organization continues to adapt and use more relevant AI technologies in their product development Roadmaps.
Jeffrey Miller: I'll let Jeff handle some of the part of your question, Rich, that relates to the seasonality and the timing of some of our revenue actions.
Speaker Change: I'll, let Jeff handle some of the part.
Speaker Change: Part of your question rich that relates to the seasonality and the timing of some of our revenue actually grew.
Jeffrey Miller: Great, Rich, thanks for joining us today. In general, I would say that you can anticipate that with 90% recurring revenue, we will have pretty steady revenue throughout 2025, with increases expected from Q1 through Q4. As we look at our range of expectations to hit the top end of the range, we'll probably see some additional lift expected in Q4, related primarily to an opportunity for new customer opportunities to contribute in-year in that fourth quarter.
Rich: Rich thanks for joining us today.
Rich: In General I would say that you can anticipate that with 90% recurring revenue, we will have pretty steady revenue throughout 2025 with increases expected from Q1 through Q4.
Rich: As we look at our range of expectations to hit the top end of the range, we'll probably see some additional lift expected in Q4 related primarily to an opportunity for new customer opportunities to contribute in year in that fourth quarter.
Speaker Change: Great and then circling back on part of one of the responses. When you think about AI and what it can do for the company can you talk about how maybe two different directions. One does it offer some new revenue opportunities where it can enhance the platform and offer some new things or do you feel like that will just become sort of a new table Stakes for the bank.
Jeffrey Miller: Great.
Louis Ferraro: And maybe circling back on part of one of the responses, when you think about AI and what it can do for the company, you talk about how maybe two different directions. One, does it offer some new revenue opportunities where it can enhance the platform and offer some new things? Or do you feel like that will just become sort of new table stakes for the base offering? And then a lot of companies we're talking to believe that internally, it can help them over time cut material costs, whether that's increasing efficiency of development or back office efforts in accounting, etc.
Speaker Change: This offering and then a lot of companies, we're talking to believe that internally that can help them overtime cut material costs for that.
Speaker Change: Increasing efficiency of development, our back office efforts in accounting et cetera. So how much do you view that as an opportunity to continue to kind of drive top line and expand margins. Thanks.
Louis Ferraro: So how much do you view that as an opportunity to continue to kind of drive top line and expand margin?
Speaker Change: Thank you Youre looking at AI very much the same way we are a first we're looking at it on the product platform and how it can both enrich the experience for consumer and has the potential to create.
Louis Ferraro: Thank you.
Jeffrey Miller: You're looking at AI very much the same way we are. First, we're looking at it on the product platform and how it can both enrich the experience for consumer and has the potential to create additional opportunities for revenue. We have already employed AI extensively through both machine learning to present the types of memories that were going to be most relevant for you. And then we use generative AI through our genius offering to allow AI to be placed in your hand so that you can take an old form of photo that might have been captured 20 years ago and update it with a 3D filter and make it an entirely new piece of artwork.
Speaker Change: Additional opportunities for revenue, we have already employed AI.
Speaker Change: Extensively through bulk machine learning to present the types of memories that we're gonna be most relevant for you.
Speaker Change: And then we use generative AI through our genius offering to allow AI to be placed in your hand. So that you can take an old form a photo that might've been captured 20 years ago and update it with a three D filter and make it an entirely new piece of artwork.
Jeffrey Miller: We have the ability to modularly turn on and turn off capabilities like Genius that, in some customer deployments, will allow us to charge that as a premium feature. That's not something we've employed to date because we're just introducing this AI technology into the platform, but we have those elements in the platform to enable it.
Speaker Change: We have the ability to modular really turn on and turn off capabilities like genius that in some customer deployments will allow us to charge that as a premium feature that's not something we've employed to date because we're just introducing this AI technology into the platform, but we have those elements in the platform to enabling now.
Jeffrey Miller: Now, let me address your opportunities for efficiency. We are employing AI tools both for the operations of our business, just day-to-day, as well as in the development of our products. Early phases of that, but we're already seeing mundane QA processes being employed through AI that are improving the operational efficiency of our development. that has the promise of reducing operating expenses and allowing our talented team to focus on more interesting technology and feature enhancements. So we do think we'll see benefits on both sides.
Speaker Change: Let me address your opportunities for efficiency.
Speaker Change: We are employing AI tools, both for the operations of our business just day to day as well as in the development of our products early phases of that but we're already seeing mundane QA processes being employed through AI that are improving the operational efficiency of our development efforts that has the.
Speaker Change: The promise of reducing operating expenses and allowing our talented team to focus on more interesting technology and feature enhancements. So we do think we'll see benefits on both sides.
Louis Ferraro: Great, thanks.
Speaker Change: Alright. Thanks.
Louis Ferraro: Thank you.
Speaker Change: Thank you.
Speaker Change: As a reminder, if you'd like to ask a question. It is star one.
Operator: And as a reminder, if you'd like to ask a question, it is star 1.
Speaker Change: Next question here, So Mike Lattimore from Northland Capital. Please go ahead.
Aditya Dagaonkar: Next question here is from Mike Latimore from Northman Capital. Hi, this is Aditya on behalf of Mike Latimore.
Speaker Change: Hi. This is other deal on behalf of Mike Latimore could you give some color on what are your plans on that refinancing do you expect some delay in the repayment of the debt or what's the due date late.
Louis Ferraro: Could you give some color on what are your plans on debt refinancing? Do you expect some delay in the repayment of the debt or what's the due date like? Sure. So much as the company undertook when we renegotiated our preferred instrument in 2024, the debt refinancing is something that we are actively looking at. We're examining all of our options, and we feel that we will have a very clear and concrete path to refinance our senior notes and our term loan as well in the coming months, and we'll update the financial community once we are further down that path.
Speaker Change: Sure.
Speaker Change: So much as the company undertook a when we renegotiated our preferred instrument in 2024.
Speaker Change: The debt refinancing is something that we are actively looking at we're examining all of our options.
Speaker Change: And we feel that we will have a very clear and concrete path to refinance our senior notes and our term loan as well in the coming months and will update the financial community. Once we are further down that path.
Speaker Change: Got it on could you also give some color on how important is the prepaid sector to the growth.
Louis Ferraro: Got it.
Louis Ferraro: And could you also give some color on how important is the prepaid sector to the growth? Yeah, great question. It represents a relatively small percentage of our total customer base, I'd say less than 5%. However, that prepaid segment, the value segment as Verizon refers to it, is one that is getting extra attention and more marketing and advertising dollars in the Verizon circles. So we believe that that will be a catalyst for further subscriber growth and adoption through the launch of new brands that they have and or our integration of our cloud offer into the high end of those prepaid subscribers.
Speaker Change: Yes, great question.
Speaker Change: Represents a relatively small percentage of our total customer base I would say less than 5% today. However that prepaid segment the value segment as Verizon refers to it is one that is getting extra attention and more marketing and advertising dollars in the Verizon circles. So we believe that that will be a catalyst for <unk>.
Speaker Change: Further subscriber growth and adoption through the launch of new brands that they have.
Speaker Change: <unk>, our integration of our cloud offer into the high end of those prepaid subscribers. So we expect it to grow as a percentage of total and it will be a contributor including in 2025 to our subscriber revenue per revenue projections.
Louis Ferraro: So we expect it to grow as a percentage of total and it will be a contributor, including in 2025, to our subscriber revenue projection. Got it.
Speaker Change: Got it thank you.
Louis Ferraro: Thank you. Sure.
Speaker Change: Sure.
Speaker Change: Great. Thank you I'd like to turn the floor back to management for any closing comments.
Jeffrey Miller: for Back-to-Management for any Yeah, simply before we go into the Safe Harbor Statement, I'd like to first thank the employees of Synchronoss, because we did have a transformative year in 2024, and it could not have been accomplished without their focus, their effort, and their belief in the platform. I'd also like to thank the investor community for sticking with Synchronoss through many transitions. We feel like we now have a business model, a strategy, and a product line that's a great foundation for growth, and we appreciate your ongoing support.
Speaker Change: Yeah simply before we go into the Safe Harbor statement I'd like to first thank the employees of synchronous because we did have a transformative year in 2024 and it could not have been accomplished without their focus their effort and their belief in the platform.
Ryan: I'd also like to thank the investor community for sticking with synchronous through many transitions we feel like we now have a business model a strategy and a product line that has a great foundation for growth and we appreciate your ongoing support with that I'll turn it back to you Ryan.
Ryan Gardella: With that, I'll turn it back to you, Ryan. Thanks, Jeff.
Speaker Change: Okay.
Speaker Change: Thanks, Jeff.
Ryan Gardella: Before we conclude today's call, I'd like to provide the Synchronoss Safe Harbor Statement that includes important cautions regarding forward-looking statements made during to discuss certain factors which are likely to influence the company's business going forward. Any factors that are discussed today are not historical. Particularly, comments regarding our prospects and the market opportunities should be considered forward-looking statements within the meaning of applicable securities laws. These forward-looking statements include comments about the company's plans and expectations of future operations. Forward-looking statements are subject to a number of risks and uncertainties which cause actual results to differ materially.
Speaker Change: Before we conclude today's call I would like to provide the synchronous safe Harbor statement that includes important cautions regarding forward looking statements made during this call.
Speaker Change: Please call management discuss certain factors, which are likely to influence the company's business. The company's business going forward any factors that are discussed today are not historical particularly comments regarding our prospects and market opportunities should be considered forward looking statements within the meaning of applicable securities laws. These forward looking statements include comments about the company's plans and expectations of future.
Speaker Change: Performance for them.
Speaker Change: These statements are subject to a number of risks and uncertainties 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 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.
Ryan Gardella: All listeners are encouraged to review the company's SUC filings, including its most recent 10-K and 10-Q, for a description of these risks.
Ryan Gardella: Statements made during this call are made as of today, and the company does not undertake any obligation to update or revise any of the such forward-looking statements, whether as a result of new information, future events, changes in expectations, or otherwise except for applicable violations.
Speaker Change: As a result of new information future events changes in expectations or otherwise, except where applicable by law.
Ryan Gardella: Please note that throughout today's call, management discussed certain non-GAAP financial measures such as adjusted EBITDA. Although non-GAAP financial measures are derived from GAAP numbers, adjusted EBITDA does not necessarily equate the cash generated by operations that does not account for such items as deferred revenue or the capitalization of software development. Today's earnings release describes the differences between the company's non-GAAP and GAAP reporting and prevents a reconciliation for the periods reported in the release.
Speaker Change: Please note that today's throughout today's call management discuss certain non-GAAP financial measures such as adjusted EBITDA, Although non-GAAP financial measures are derived from GAAP numbers 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.
Speaker Change: Today's earnings and earnings release describes the differences between the company's non-GAAP and GAAP reporting and presents a reconciliation for the periods reported in the release. Thank you for joining us today for synchronous technologies fourth quarter and full year 2024 earnings call you may now disconnect.
Ryan Gardella: Thank you for joining us today for Synchronos Technologies' fourth quarter and full year 2024 earnings call.
Operator: You may now disconnect.
Speaker Change: Hum.
Speaker Change: [music].
Speaker Change: Yes.
Speaker Change: [music].