SNCR Q2 2020 Earnings Call

T. Michael Walkley - Canaccord Genuity LLC: Okay. Great. New format for this... Glenn Lurie - Synchronoss Technologies, Inc.: Yeah. We appreciate you guys' patience. We just think Zoom's kind of the future and so we appreciate you guys working with us. How are you, Mike?

T. Michael Walkley - Canaccord Genuity LLC: I'm doing well. Hope everybody's doing well on the call. Glenn Lurie - Synchronoss Technologies, Inc.: Thank you.

T. Michael Walkley - Canaccord Genuity LLC: Yeah. So I guess first question for me is just on the strong free cash flow in the quarter with the Verizon renewal. Was there an aspect of upfront cash for that or can you maybe walk through the steps that drove the strong cash flow? Glenn Lurie - Synchronoss Technologies, Inc.: I'll let David answer that. David D. Clark - Synchronoss Technologies, Inc.: Yeah. Glenn Lurie - Synchronoss Technologies, Inc.: Let me say there's no cash from that. No. So, go ahead, David. David D. Clark - Synchronoss Technologies, Inc.: Yeah. So the Verizon renewal obviously is this quarter and there was no cash in the second quarter. Really, second quarter cash driven by just good liquidity management and obviously stronger EBITDA certainly was expected, both internally and externally. Glenn Lurie - Synchronoss Technologies, Inc.: Yeah. And I'd add, Mike, that David and team did a fantastic job. Once we made the decisions on the cost-cutting initiatives that we already -as you remember, we already had some cost-cutting going on when we started the year. We obviously added to that with COVID hitting. The team has just executed fantastically and that's what you're seeing.

T. Michael Walkley - Canaccord Genuity LLC: Okay. Great. And I guess while I have the line here, a follow-up question. Glenn Lurie - Synchronoss Technologies, Inc.: Sure.

T. Michael Walkley - Canaccord Genuity LLC: Just on the strong cost reduction, how should we think about operating expenses levels going forward? Is it more cost coming out of the model? If so, where's – is it coming out of more cost of goods sold or OpEx or just trends we should think about on the cost line? David D. Clark - Synchronoss Technologies, Inc.: Now, the cost reductions are across the board. Costs will kind of be flat to slightly down for the remainder of the year by quarter is our expectation. We took costs out of business across the board. Obviously, our largest cost components will probably be a little larger because that's where the cost is and that's where we'll take out the majority.

T. Michael Walkley - Canaccord Genuity LLC: Great. And then, Glenn, a follow-up question for you just on kind of the fundamentals in dealing with operators. Can you talk about some of your cloud trends now that smartphones slowly picking up off some of the bottoms maybe earlier in the quarter? And just with the AT&T and the timing, when you think some of these Android deals, you'll start to see like a step-up in subscriber base based on anything that (28:07) you can share over the last couple of months? Glenn Lurie - Synchronoss Technologies, Inc.: Yeah. Actually appreciate that. Couple things to think about in this environment that we're living in, you're absolutely right, the carriers obviously had closed doors. Carriers have announced that they're not even going to reopen some of the stores. The good thing is we're still seeing strong results. As we said, we're ahead of plan with our largest customer. One of the reasons is, is that actually these enhancements that we've been working with them on have obviously led to very decent gross adds, but we've also seen the churn drop way down with these customers. So, we are actually in a good spot with the majority of our customers as far as how they've executed working with us. And as I said in my comments, we have marketing work we're doing, which we are hoping to increase in the second half of the year, not just with Verizon, but with all. And then when you asked about AT&T, yes, we were very candid as we would plan to always be that some things got pushed back based on COVID. But you saw AT&T make announcements around their devices and did some very exciting announcements that they're going to focus on cloud in those Android devices. So we expect to start seeing that pick up immediately here in the third quarter. I think the opportunity, though, Mike, is there. I mean the carriers are looking for opportunities to grow revenue. This is a fantastic opportunity that they see and understand. I'm very, very optimistic that we can continue that trend for the remainder of the year and to 2021.

T. Michael Walkley - Canaccord Genuity LLC: Last question and then I'll pass on the Zoom call here. Just, Glenn, overall, it sounds like IoT, maybe some digital, some things got pushed out because it's just tougher to engage with customers face-to-face. Can you about any deals that's been lost or for existing maybe pushed out a little bit or just kind of how your remote sales is interacting in this tough environment? Glenn Lurie - Synchronoss Technologies, Inc.: Yeah. I'd tell you this. First of all, we haven't lost anything. The environment is as we all know. You've got to work twice as hard to get it done and we are doing that. Digital actually is performing very well. I hope from my comments, you didn't take that away, but digital business is doing well. Most people, when they hear us talk about digital think about DXP, but we have a host of products in our digital platform as I said. And we've cut numerous deals during the quarter that were very, very exciting for us and whether on a financial and analytics side or the spatial side, as well as the continued work. I would tell you, Mike, that this environment, the future is all about digital. The future is all about touchless experiences. The future is and every company that we do business with is looking at how they're going to make it work in the new normal. And we have a lot of opportunity in our digital business to continue to grow it. On the IoT side, without question, we've done well. But the future of IoT is not just a smart building; it's a healthy building. And we have a SaaS platform that's extensible and flexible with machine learning and analytics attached. And candidly, a lot of people are coming to us now on the IoT side to talk about how not only can they make their building smart, but how can they make it healthy and know real time that it's healthy. The other thing that we're talking about is real-time remediation of pathogens in a building. And I would just say there's not going to be a building, a venue, a restaurant, that, as we go forward, people aren't going to want to know it's safe. And we believe we have a platform that can help do that, so we're – I'm – my enthusiasm around IoT has actually gone up. And I think we've got work to do, but so do others, and I think we've got a very competitive platform and product to offer.

T. Michael Walkley - Canaccord Genuity LLC: Thanks for taking my questions and congrats on the strong margins. Glenn Lurie - Synchronoss Technologies, Inc.: Thanks, Mike.

Operator: Okay. Our next question will come from Mike Latimore with Northland. Michael Latimore - Northland Securities, Inc.: Hi there, you all. Glenn Lurie - Synchronoss Technologies, Inc.: Hey, Mike. Michael Latimore - Northland Securities, Inc.: Hi there. Good morning. Good to see you, guys. So I guess on the Verizon deal, that was great. Congratulations on that and also the quarter, obviously. A lot of times, these big deals, they get renewed a month or two before they're kind of set to expire. You guys renewed this fairly early here. Glenn Lurie - Synchronoss Technologies, Inc.: Yeah. Michael Latimore - Northland Securities, Inc.: Can you just talk through what was the catalyst to do this kind of early renewal? Glenn Lurie - Synchronoss Technologies, Inc.: Sure. I mean, I think couple of things. One, the success that we've been having for a long time with them and I would point out (32:54) the relationship as well. This is a very important product for Verizon. It is for us, obviously, with them as our largest customer. But as carriers – not speaking outside of Verizon – as carriers look to how they're going to find incremental revenue and the dollars that they're all spending on 5G, massive amounts and billions of CapEx, we're going to continue to look for these opportunities. Verizon obviously has been a customer of ours for many years. We sat down with them and talked about the future and it just made sense for us to relook at the whole agreement. You also heard me talk about the fact that we now have a joint marketing agreement for the first time, which is really exciting for us because majority of the success we've had with them has been in that startup flow that we talk about for new and upgrades and we've done great, but my push and ask is that we have so much more opportunity to go back to their base, which obviously we are now going to do and do it together. The second piece of this is that the other initiatives that I mentioned. Obviously, we're excited about those and having conversations about where we want to take this platform. And by the way, we do this with all of our customers, right? Our customers have a beautiful Personal Cloud Platform that they may, obviously, want to have advantages. And so that's how we work with our customers individually. And so the opportunity on both sides, we're really wanting to elongate the agreement. Timing was not about when our first agreement ends; it's about where do we want to go in the future. And that's really was the catalyst. Michael Latimore - Northland Securities, Inc.: Great. Great. And then just from a rev rec standpoint, I know you talked about $5 million a quarter roughly this year. How should we think about the influence next year from this – on rev rec? David D. Clark - Synchronoss Technologies, Inc.: So that was specifically the deferred revenue. We had deferred revenue that we've been recognizing over the past couple of years that would have basically been amortized out by the end of this year. As a result of the renewal, it gets extended for the remaining contract or the new contract life, I should say. So our deferred revenue runoff from this contract, in particular, will be under $1 million for each quarter going forward. So that's the change. There would have been $5 million recognized in each of the next two quarters. We're not going to recognize that. It's going to be pushed out. Glenn Lurie - Synchronoss Technologies, Inc.: Yeah. Mike, really important obviously I'll repeat and David said it numerous times. This is a non-cash (35:21), right? David D. Clark - Synchronoss Technologies, Inc.: Right. Glenn Lurie - Synchronoss Technologies, Inc.: So not impacting our cash. I do think David's comments are important for folks to note. This should really simplify how you all look at us from an EBITDA perspective as well. And then I think really important, as David said, going out, it's negligible when you think about the total amounts and where it's going to be. So, cleaned up a lot as well at the same time. Michael Latimore - Northland Securities, Inc.: Great. Makes sense. So then, Glenn, did you say that going forward, pretty much every new Android subscriber at AT&T will go through the OOBE process? Is that exiting this quarter (35:55)? Glenn Lurie - Synchronoss Technologies, Inc.: Yeah. Not every. Obviously, it's by device. And you actually wrote a nice note about the devices that were coming out. We will see more of those devices coming out and that will continue to move up based upon their new device launches. So, yeah, we're starting to see that flow and we're excited about it. Michael Latimore - Northland Securities, Inc.: Great. And just last one. On CCMI, you mentioned some additional business there. What does that relates to and then when do you expect kind of the – maybe the first official service lines there? Glenn Lurie - Synchronoss Technologies, Inc.: Yeah. Well, as you know, Mike, and I appreciate the question, we can't answer and speak for CCMI. They've said 2020 and we'll leave it at that as far as the launch. As far as other business, yeah, we are working with them hand in hand. They are picking and looking at their strategies and in situations have asked for help with other things, which is what those agreements are. And that's really all I can say at this point in time. Michael Latimore - Northland Securities, Inc.: Okay. Thanks. Good luck. Glenn Lurie - Synchronoss Technologies, Inc.: Thank you. Leslie Gahagan - Synchronoss Technologies, Inc.: And with that, that concludes all of our questions. Glenn Lurie - Synchronoss Technologies, Inc.: Okay. Leslie Gahagan - Synchronoss Technologies, Inc.: All right, and that concludes the call. Glenn Lurie - Synchronoss Technologies, Inc.: If I can, Leslie, one last thing, I just want to thank everybody again for coming on the call this morning. I'm very proud of the Synchronoss team. Very proud of the results that we were able to deliver during the environment that we are in. The team has been incredibly prudent about its execution, taking care of our customers. I want to again thank Pat, our CTO, and Jeff, our Chief Commercial Officer, for the results that they and their teams have driven. And we are looking forward to the second half of the year. Thank you guys very much. David D. Clark - Synchronoss Technologies, Inc.: Hey, Glenn. Glenn Lurie - Synchronoss Technologies, Inc.: Yeah. David D. Clark - Synchronoss Technologies, Inc.: Real quick. Rich Baldry asked a question about – he want to know about pipeline changes from any of the global carrier prospects. Glenn Lurie - Synchronoss Technologies, Inc.: Oh. Great. Hey, Rich. Thank you. So far, as far as pipeline changes, really not a lot of pipeline changes. Obviously, as I said earlier, we've not lost business. We had obviously – things are going to take a bit more time. I would say our pipeline is still strong and growing. We are candidly having to be and change the way we think about how you drive pipeline. We've seen our industry events be canceled. We expect that going into 2021, the CESs of the world, the Mobile World Congresses of the world are going to have a hard time putting those events. And obviously, CES already announced it's going to be a digital event. So we're looking at other ways and actually executing other ways to continue to have conversations with our carrier partners, with new carrier partners looking at channels of distribution. So all of those things are in play, but right now, I'd say we feel good about where our funnels are. David D. Clark - Synchronoss Technologies, Inc.: Glenn, Sterling has one more question. Glenn Lurie - Synchronoss Technologies, Inc.: Sure. David D. Clark - Synchronoss Technologies, Inc.: He's not coming on. Glenn Lurie - Synchronoss Technologies, Inc.: Okay. We can follow up with Sterling... David D. Clark - Synchronoss Technologies, Inc.: Then we'll follow up with Sterling. Glenn Lurie - Synchronoss Technologies, Inc.: ...next day or so. Glenn Lurie - Synchronoss Technologies, Inc.: Again, folks, appreciate the new technology. We are – I think Zoom is great and we're going to continue to work with this. But thank you all very much for joining and look forward to speaking with many of you over the next couple of days.

Operator: Goodbye.