Q1 2025 Synchronoss Technologies Inc Earnings Call
Greetings and welcome to the Synchronous Technology's first quarter, 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode.
A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host, Ryan Gardella Investor Relations. Thank you, sir. You may begin.
Speaker Change: Conference call. Joining us today are Synchronous Technologies Presidents and CEO Jeff Miller and CFO , Louis Ferraro. By now, everyone should have access to the company's first quarter, 2025 earnings press release issued this afternoon, which is available on the investor relations section of the website.
Speaker Change: Today's call will begin with our marks from Jeff and Lil, after which we'll host a question and answer a session.
Speaker Change: Before we conclude, I'll provide the necessary cautions regarding the forward-looking statements made by the management during this call. I would like to remind everyone that this call will be recorded and made available for a reply via a link in the investor relations section of the company's website.
Speaker Change: Now, I'll turn the call over to Jeff Miller, President C. E. O. Sikres. Jeff
Jeff Miller: Thank you, Ryan. Welcome everyone and thank you for joining today's call.
Jeff Miller: We're pleased to report another quality's earnings or strong quarter of solid financial
Jeff Miller: Our strategic transformation this past year to a leading global cloud solutions provider has resulted in a more predictable, stable business model, strengthening our financial profile and delivering improved profitability.
Jeff Miller: Revenue for the quarter was $42.4 million, including subscriber growth of 3.3% across our global customer base.
Jeff Miller: Adjusted EBITDA increased 17% year-over-year to $12.7 million, representing an adjusted EBITDA margin of 30.2%.
with over 90% of our revenue.
Classified as Recurring Revenue
Jeff Miller: and more than 90% of our projected 2025 revenue under long-term contracts with Tier 1 carriers like AT&T, Verizon, and Softbank were operating from a position of strength and poised for additional growth as the year progresses.
Jeff Miller: Therefore, despite the current challenging macroeconomic landscape brought on by the imposition of tariffs and further global trade uncertainties, we are reiterating our annual guidance metrics.
Jeff Miller: Our cloud-centric business model anchored by Stable Recurring Revenue, 90% of which is derived from U.S.-based customers.
Jeff Miller: and the long-standing partnerships that we maintain with leading telecom operators provides the stability needed to navigate the challenges created by these macroeconomic issues.
Jeff Miller: The vital service that our personal cloud solution provides to end users, to store and protect their cherished memories, transcends physical boundaries, devices, and operating systems, which should help further insulate our top line revenue from some of the challenges experienced by cell of our competitors.
Jeff Miller: Beyond our operational performance, as you may have already seen, subsequent to the end of the quarter, we announced the refinancing of our debt, with a 200 million four-year term loan led by T.P. Birchgrove.
Jeff Miller: This allowed us to retire the remaining $121 million in senior notes
Jeff Miller: and $73 million in our prior term loan, which strengthens our capital structure and extends our debt maturity out to 2029.
Jeff Miller: This refinancing gives us the flexibility to continue investing in our personal cloud platform and to pursue growth opportunities.
Jeff Miller: We've also driven meaningful cost control, cutting overall operational expenses by 11.5% year over year through continued diligent efforts to find efficiencies and streamlined processes.
Jeff Miller: By optimizing resources and consolidating operations, we greatly reduced our expenses and are committed to finding more ways to trim costs and redirect those savings to invest in our flagship personal cloud solution.
to accelerate innovation and growth.
Jeff Miller: Together, these corporate-level developments are new term-loan refinancing and consistent cost control equip us to operate with agility, meet the evolving needs of our carrier partners, and deliver value to our subscriber base.
Jeff Miller: This financial and operational discipline flows directly into the momentum that we're seeing from our key customers.
Jeff Miller: AT&T, Softbank, and Verizon, where the value of our services is driving cloud subscriber growth.
Jeff Miller: At AT&T, we're continuing to see accelerated adoption through streamlined digital onboarding that's both increasing cloud awareness and elevating our take rates.
Jeff Miller: This deep integration into AT&T's customer journey creates real value for the carrier and its users, reinforcing our role as a trusted partner.
Speaker Change: At SoftBank, we're seeing positive retail sales momentum for ancient data box.
Speaker Change: which is leveraged across multiple soft bank mobile brands, resulting in subscriber additions which were ahead of our expectations for the quarter.
Speaker Change: If Verizon were seeing continued progress and the cloud offer transition from bundle plans to a premium MyClient Puck.
Speaker Change: Verizon Cloud's prominence within their perk portfolio has served to elevate its focus across all Verizon sales channels.
Speaker Change: And that awareness and priority is showcasing itself with continued growth in cloud per adoption.
Speaker Change: As another example of this positive momentum, in April , Verizon launched a new small business offering called My Biz, where our cloud storage offer is again playing a prominent role as a featured perk for the SMB segment.
Speaker Change: We're also working closely with Verizon to further integrate our technology into their app ecosystem.
Speaker Change: And as part of that journey, I'm excited to share that we've recently completed an integration of our Cloud Verizon SDK or software development kit into the My Verizon app.
Speaker Change: This integration is in its early phases, but over time we anticipate that it will drive expanded discoverability of the Ryzen Cloud service, particularly with iOS users, leading to greater subscriber adoption and utilization.
Speaker Change: These efforts with AT&T, Soft Bank, and with Verizon, strengthen our recurring revenue base and highlight the confidence our partners have in our platform.
We're also seeing growing traction with capsule
Speaker Change: Our Synchronous Branded Cloud Solution designed for smaller and international operators, which is opening new avenues for growth.
Speaker Change: Capsules Plug and Play model eliminates the integration barriers allowing carriers to quickly roll out their personal cloud to their subscribers and we're seeing encouraging early results.
We're also increasingly confident in our sales pipeline.
Speaker Change: Mobile and broadband carriers are under pressure to boost revenue and retain customers.
Speaker Change: We're in active discussions with new carriers and existing partners, looking to expand their offerings.
Speaker Change: and while we'll hold off on the details until contracts are signed, we're optimistic that these conversations will yield new customers supporting our goal of double-digit revenue growth in the future.
Beyond the recently launched capsule solution
and Healthy Pipeline of New Cloud Customer Prospects.
Speaker Change: We're also working with existing customers to explore complementary cloud adjacent applications and capabilities that will hold the potential to drive more revenue from our existing subscriber base.
Speaker Change: Broadly speaking, we're keeping a close eye on industry headwinds, particularly tariffs that are impacting national cellular carriers and their device OEMs.
Speaker Change: as the terrorists carry the potential to drive up device costs.
This could potentially create a push-pull dynamic in the future.
Speaker Change: On one hand, tariffs could slow phone upgrade cycles as consumer delays as consumers delay
Speaker Change: The first quarter allowed us to build on a solid foundation for the remainder of the year and poises us for further growth.
Speaker Change: Strategic moves like our new turn loan refinancing and discipline cost control, combined with a momentum at AT&T Verizon and SoftBank, position us to continue to drive subscriber growth as we move through 2025.
Speaker Change: Now I'll turn it over to Lou for the financial details. Lou, thank you, Jeff, and thank you everyone for joining us today.
Lou: First, I'll review our key financial metrics for the first quarter of 2025, which we believe serve as critical benchmarks for our performance, and then we'll provide an update on our financial results and outlook.
Starting with our Key Performance Indicators
Lou: Quarterly recurring revenue was 93.1% of total revenue, reflecting our stable cloud business model, while cloud subscriber growth was 3.3% driven by demand for our personal cloud platform.
Lou: Turning to our financial results for the first quarter-ended March 31, 2025, total revenue was $42.2 million. Down slightly from $43 million in the prior year period.
Lou: due to the previously discussed exploration of a customer contract in December of 2024, partially offset by 3.3% cloud subscriber.
Lou: Adjusted growth profit was 33.4 million or 79% of total revenue, benefiting from cost efficiencies and our cloud focused operations.
Lou: Income from operations was up 79.8% year-over-year from $4.6 million to $8.2 million driven by Disciplined Expense Management.
Lou: As Jeff mentioned, we closed a 200 million four-year-term loan subsequent to the end of the quarter.
Lou: This allowed the company to retire the $73.6 million from the prior term loan and allowed the company to redeem the remaining $121.4 million in senior notes on or around May 12th of 2025.
Lou: The new term loan priced at Sofer plus 700 basis points, with 150 basis point leverage base step down. Positions us to benefit from potential rate declines.
Lou: Plus, quarterly principal amortizations will continue to lower interest costs over time.
Lou: Moving down the income statement, our total operating expenses decreased 11.5%
from $38.4 million to $34 million.
Lou: All components including cost of revenues, research and development, sales general administrative, restructuring charges, and DNA were down year over year. We are going to continue to be focused on intense cost control to help our profitability.
Lou: Net loss was $3.8 million dollars or a negative $0.37 per share.
Lou: This change was driven primarily by the negative impact of $5.6 million non-cash foreign exchange losses, primarily due to re-evaluations of inter-company payables and receivables.
Lou: Adjusted EBITO was $12.7 million, representing a 30.2% margin, consisting with our high margin model and supported by cost control, including a reduction in total cost and expenses on a year-over-year basis as we mentioned previously.
Moving to Belgium
Lou: Cash and cash and equivalents were $29.1 million as of March 31st, 2025. Free cash flow was negative $3 million and adjusted free cash flow was negative $3.3 million.
Lou: Next, I would like to provide an update on our tax refund steps.
Lou: Recent events and conversations have resulted in our confidence-level increasing material that we are near the end of this extended and painful process for our shareholders.
Lou: During the first quarter and into the second quarter of 2025, we've had our tax return move into the final stage of review before a check or a wire is sent to us.
Lou: There is no disagreement on the amount owed and we are even more confident in the receipt in 2025 than we did and talked about on our last call.
Lou: Under our new term loan agreement, once we receive the refund, we are obligated to use 75% of the proof seats
Lou: plus applicable inches from the anticipated $28 million IRS refund to pre-pay a portion of the term loan at Paul. We'll update the entire financial community as soon as we receive more actionable information.
Lou: Moving to guidance, we are reaffirming our 2025 outlet and are currently expecting revenue of between $170 and $180 million, adjusted gross margin of between 78 and 80%.
Recurring Revenue of at least 90% of total revenue
Lou: Adjusted EBITDA of $52 to $56 million and pre-cash flow of between $11 and $16 million which excludes the effect of the federal tax refund.
These projections reflect our confidence in subscriber growth, cost discipline,
Lou: and financial flexibility from our refinancing and refund, despite macroeconomic challenges.
Lou: I'll now turn the call over to the operator for Q&A. Thank you for joining us.
Lou: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad.
Lou: The confirmation tone will indicate that your line is in the question queue.
Lou: You may press start too if you would like to remove your question from the queue. For participants using speaker equipment it may be necessary to pick up your hands that before pressing the start keys. One moment please while we pull for questions.
Speaker Change: Our first question comes from Richard Baldry with Roth Capital Mark Partners. Please proceed with your question.
Richard Baldry: Thanks. If we look sequentially, the costs have continued to fall, whether that's above the line or on the opposite side.
Speaker Change: Can you talk about, to what degree do you think you're now sort of getting that cost of structure down where you want it to be? Is there any further cost or synergy to come out of there?
Good afternoon, Richard. Thanks for that question. I think...
Speaker Change: Synchronos over the last few years continually looks at our cost structure as optimistically as we can from time to time to see if there are any refinements we can make. We think that the major reductions we did at the close of 2023, and again, to a lesser extent at the close of 2024 position as well.
Speaker Change: We're glad we did it especially in light of the macroeconomic conditions we're seeing and we think in general the cost structure where it is today is largely where we'd like it to be for this point in our history as a company.
Speaker Change: Thanks, and when you sort of touch lightly on having some conversations with some new prospects, you talk about sort of where you think those would be or those just international of the same sort of customers you have now, is it something that would expand on existing customers or new opportunities for revenue growth? Thanks.
Speaker Change: Yeah, you're welcome. It's certainly pleasing to say that those opportunities are kind of many fold and that they cover the geographies around the globe. So we have active conversations going on in the United States.
Speaker Change: because there are, we believe, a number of emerging mobile and broadband players who are prime candidates to leverage a cloud-based solution to complement their broadband and mobile offerings.
Speaker Change: Similarly, we have opportunities in the Asia-Pacific region and in Europe .
Speaker Change: as well candidly as in Africa. So we have our business development activities very actively engaged with a lot of conversations in place and we hope to be in a position soon to be able to report the next customer to join the platform, but we are making study progress.
Great. Thanks.
Speaker Change: Yeah, Hi, this is on behalf of Mike Lattimore.
Speaker Change: Could you give some color on what kind of free cash flow. We can expect this year.
Speaker Change: Okay.
Speaker Change: Certainly.
Speaker Change: As we said, we reiterated our guidance or our free cash flow should be between 11 and $16 million. If you look at the last couple of years for synchronous.
Speaker Change: That tends to move around from quarter to quarter, usually highlighted very very strong fourth quarter, and we think we will probably see a consistent performance for that in 2025.
Speaker Change: Got it.
Speaker Change: Oh, among AT&T and Softbank, which one is growing faster.
Speaker Change: I would say that they're both.
Speaker Change: Very much growing and are at a healthy clip and Theyre both meeting our expectations. At this time, we really try to avoid divulging any specific information on any individual client, but collectively they are driving the biggest portion of the growth for the first quarter as reported.
Speaker Change: Got it.
Speaker Change: Maybe some color on how should we think about modeling gross margins for the year.
Speaker Change: Yeah.
Speaker Change: I think I think our gross margins as we said, we'll probably be be unadjusted basis between 78% to 80%.
Speaker Change: We've been very close to that now for the last couple of quarters.
Speaker Change: And with our expense structure being where we'd like it to be we expect to continue to perform in that range throughout the rest of this year.
Speaker Change: Got it thank you.
Speaker Change: Yes, very well.
Speaker Change: As a reminder, if you would like to ask a question. Please press star one on your telephone keypad.
Speaker Change: There are no for no more further questions at this time I would like to turn the floor back over to Jeff Miller for closing.
Speaker Change: <unk>.
Speaker Change: Thank you once again I'd like to thank the team members from synchronous who have continued to remain committed to enhancing and developing our cloud platform.
Speaker Change: Serving our customers and as evidenced by our results for the quarter managing our cost in a very disciplined fashion there.
Speaker Change: Their dedication and commitment to the business is something that we all value I'd also like to thank all of our shareholders for your active and long term participation with US we look forward to giving you further updates throughout the year.
Speaker Change: With that I'll turn it back to you for the Safe Harbor.
Speaker Change: Thanks Chuck.
Speaker Change: Before we conclude today's call I would like to provide synchronous its first safe Harbor statements that includes important cautions regarding forward looking statements made during this call. During this call management discuss certain factors that are likely to influence a company's business going forward.
Speaker Change: The factors that are discussed today that are not historical particularly comments regarding our prospects and market opportunities should be considered forward looking statements on that maybe like a whole securities laws. These forward looking statements include comments about the company's plans and expectations of future performance.
Speaker Change: Statements are subject to a number of risks and uncertainties could cause actual results to differ materially all listeners are encouraged to review the company's SEC filings, including its most recent 10-K. Thank you for a description of these statements made during this call are made as of today. The company does not undertake any obligation to update or revise any such forward looking statements whether as a result of new information feed.
Speaker Change: <unk> events changes in expectations or otherwise. Please note that throughout today's call management discuss certain non-GAAP financial measures such as adjusted EBITDA, Although the non-GAAP measures derived from GAAP numbers adjusted EBITDA does not necessarily equate to question cash generated by operations does not account for such items as deferred revenue with the capitalization of software development.
Speaker Change: Today's earnings release describes the differences between the company's non-GAAP and GAAP reporting and firms.
A reconciliation of the periods reported in that release. Thank you for joining us for cigarette Technologies' first quarter 2025 earnings call you may now disconnect.
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