EX-99.1 2 exhibit991_122216.htm EXHIBIT 99.1 Exhibit
Exhibit 99.1
SYNCHRONOSS TECHNOLOGIES, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



On December 16, 2016, Synchronoss Technologies, Inc. (“Synchronoss,” “our,” and “the Company” refer to Synchronoss Technologies, Inc. and all of its subsidiaries) completed a divestiture of a portion of its carrier activation business (“BPO”) to newly formed Sequential Technology International, LLC (“STI”) for a total purchase price of $146 million (the “Sale”). As part of the sales arrangement, Synchronoss will retain a 30% investment in STI, which can be reduced during the course of 2017. The historical financial results of the BPO business will be classified as discontinued operations in the Company's future filings.

The following unaudited pro forma condensed consolidated balance sheet, as of September 30, 2016, reflects Synchronoss’ financial position as if the Sale had occurred on that date. The following unaudited pro forma condensed consolidated statements of income for the nine months ended September 30, 2016 and fiscal years ended December 31, 2015, 2014, and 2013 reflect Synchronoss’ results of operations as if the Sale had occurred on January 1, 2013.

These unaudited pro forma condensed consolidated financial statements and the accompanying notes should be read in conjunction with:

I.
The audited consolidated financial statements and the accompanying notes and Management’s Discussion and Analysis of the Financial Condition and Results of Operations included in Synchronoss' Annual Report on Form 10-K for the fiscal year ended December 31, 2015 and

II.
The unaudited consolidated condensed financial statements and accompanying notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Synchronoss’ Form 10-Q for the nine months ended September 30, 2016.
 
The unaudited pro forma condensed consolidated financial statements are provided for illustrative and informational purposes only and are not intended to represent or be indicative of what Synchronoss’ results of operations or financial position would have been had the sale occurred on the dates indicated. The unaudited pro forma condensed consolidated financial statements also should not be considered representative of Synchronoss’ future results of operations or financial position.

In accordance with Article 11 of SEC Regulation S-X, the unaudited pro forma condensed consolidated financial statements reflect adjustments to the extent they are directly attributable to the Sale, factually supportable and, for statement of operations purposes, are expected to have a continuing impact on the Company’s results of operations.

The “Historical” column in the unaudited pro forma condensed consolidated financial statements reflects Synchronoss’ historical financial statements for the periods presented and does not reflect any adjustments related to the Sale and related events.

The “BPO Business” column in the unaudited pro forma condensed consolidated financial statements represents the financial position and results of BPO Business on a carve-out basis, including all net assets and corporate allocations necessary to operate the business.

The “Other Pro Forma Adjustments” column represents certain assets, liabilities and previously allocated corporate overhead costs of BPO Business that will be retained by the Company as well as certain adjustments related to the sale. The adjustments represent the Company's current best estimates and may differ from those that will be calculated to report discontinued operations in the Company's future filings.





1


SYNCHRONOSS TECHNOLOGIES, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands)



 
September 30, 2016
 
 Historical
 
BPO
Business
 
Other Pro Forma Adjustments
 
Pro Forma
Synchronoss
ASSETS
Current assets:
 
 
 
 
 
 
 
Cash and cash equivalents
$
123,319

 
$

 
$
17,335

A
$
140,654

Marketable securities
16,973

 

 

 
16,973

Accounts receivable, net of allowance for doubtful accounts
217,307

 
(51,308
)
 
42,358

B
208,357

Prepaid expenses & other assets 
48,242

 
(406
)
 
406

C
48,242

Total current assets
405,841

 
(51,714
)
 
60,099

 
414,226

 
 
 
 
 
 
 
 
Marketable securities
3,968

 

 

 
3,968

Property and equipment, net
168,083

 

 

 
168,083

Note receivable

 

 
83,000

D
83,000

Goodwill
315,185

 
(36,805
)
 

 
278,380

Intangible assets, net
215,666

 

 

 
215,666

Deferred tax assets
1,904

 

 

 
1,904

Other assets
14,082

 

 

 
14,082

Equity method investment

 

 
45,870

E
45,870

Total assets   
$
1,124,729

 
$
(88,519
)
 
$
188,969

 
$
1,225,179

 
 
 
 
 
 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
 
 
 
 
 
 
 
Account payable
$
28,724

 
$
(5,354
)
 
$
5,354

C
$
28,724

Accrued expenses 
54,066

 
(6,415
)
 
13,176

C, F
60,827

Deferred revenue
26,106

 

 


26,106

Contingent consideration obligation
8,229

 

 

 
8,229

Short term debt
38,000

 

 

 
38,000

Total current liabilities                           
155,125

 
(11,769
)
 
18,530

 
161,886

 
 
 
 
 
 
 
 
Lease financing obligation - long-term
13,082

 

 

 
13,082

Convertible debt
225,938

 

 

 
225,938

Deferred tax liability
26,397

 

 
46,724

F
73,121

Other liabilities - long term
20,399

 

 

 
20,399

Redeemable noncontrolling interest
52,616

 

 

 
52,616

 
 
 
 
 
 
 


Total stockholders' equity                          
631,172

 
(76,750
)
 
123,715

G
678,137

Total liabilities and stockholders' equity            
$
1,124,729

 
$
(88,519
)
 
$
188,969

 
$
1,225,179





2


SYNCHRONOSS TECHNOLOGIES, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)





 
Nine months ended September 30, 2016
 
 Historical
 
BPO
Business
 
Other Pro Forma Adjustments
 
Pro Forma
Synchronoss
 
 
 
 
 
 
 
 
Net revenues
$
476,658

 
$
(121,704
)
 
$

 
$
354,954

Costs and expenses:
 
 
 
 
 
 
 
Cost of services
217,004

 
(75,680
)
 
2,498

H,L
143,822

Research and development
78,408

 

 

 
78,408

Selling, general and administrative
89,799

 
(17,704
)
 
15,714

I
87,809

Net change in contingent consideration obligation
7,299

 

 

 
7,299

Restructuring charges
5,139

 

 

 
5,139

Depreciation and amortization
74,009

 
(5,866
)
 
5,866

I
74,009

Total costs and expenses
471,658

 
(99,250
)
 
24,078

 
396,486

Income (loss) from operations
5,000

 
(22,454
)
 
(24,078
)
 
(41,532
)
Interest income                 
1,492

 

 

 
1,492

Interest expense                
(5,006
)
 

 

 
(5,006
)
Other income (expense), net             
(186
)
 

 

 
(186
)
Equity method investment earnings

 

 
6,736

J
6,736

Income (loss) before income tax expense
1,300

 
(22,454
)
 
(17,342
)
 
(38,496
)
Income tax (expense) benefit   
(14,853
)
 
8,757

 
6,763

K
667

Net (loss)
(13,553
)
 
(13,697
)
 
(10,579
)
 
(37,829
)
Net loss attributable to noncontrolling interests
(8,836
)
 

 

 
(8,836
)
Net income loss attributable to Synchronoss
$
(4,717
)
 
$
(13,697
)
 
$
(10,579
)
 
$
(28,993
)
 
 
 
 
 
 
 
 
Net income loss per share attributable to Synchronoss:
Basic
$
(0.11
)
 
 
 
 
 
$
(0.67
)
Diluted
$
(0.11
)
 
 
 
 
 
$
(0.67
)
 
 
 
 
 
 
 
 
Weighted average common shares outstanding:
Basic
43,488

 
 
 
 
 
43,488

Diluted
43,488

 
 
 
 
 
43,488




3


SYNCHRONOSS TECHNOLOGIES, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)





 
Year ended December 31, 2015
 
 Historical
 
BPO Sale
 
Other Pro Forma Adjustments
 
Pro Forma
Synchronoss
 
 
 
 
 
 
 
 
Net revenues
$
578,831

 
$
(150,714
)
 
$

 
$
428,117

Costs and expenses:
 
 
 
 
 
 
 
Cost of services
239,074

 
(95,020
)
 
11,089

H,L
155,143

Research and development
91,430

 

 

 
91,430

Selling, general and administrative
90,735

 
(19,310
)
 
16,986

I
88,411

Net change in contingent consideration obligation
760

 

 

 
760

Restructuring charges
5,090

 

 

 
5,090

Depreciation and amortization
72,152

 
(8,111
)
 
8,111

I
72,152

Total costs and expenses
499,241

 
(122,441
)
 
36,186

 
412,986

Income (loss) from operations
79,590

 
(28,273
)
 
(36,186
)
 
15,131

Interest income                 
2,047

 

 

 
2,047

Interest expense                
(5,711
)
 

 

 
(5,711
)
Other income (expense), net
372

 

 

 
372

Equity method investment earnings

 

 
8,482

J
8,482

Income (loss) before income tax expense
76,298

 
(28,273
)
 
(27,704
)
 
20,321

Income tax (expense) benefit   
(29,616
)
 
11,026

 
10,805

K
(7,785
)
Net income attributable to noncontrolling interests
6,052

 

 

 
6,052

Net income (loss) attributable to Synchronoss
40,630

 
(17,247
)
 
(16,899
)
 
6,484

Income effect for interest on convertible debt, net of tax
1,920

 

 

 
1,920

Net income (loss) applicable to shares of common stock for earnings per share
$
42,550

 
$
(17,247
)
 
$
(16,899
)
 
$
8,404

 
 
 
 
 
 
 
 
Net income per share attributable to Synchronoss:
Basic
$
0.96

 
 
 
 
 
$
0.15

Diluted
$
0.89

 
 
 
 
 
$
0.15

 
 
 
 
 
 
 
 
Weighted average common shares outstanding:
Basic
42,284

 
 
 
 
 
42,284

Diluted
47,653

 
 
 
 
 
42,284





4


SYNCHRONOSS TECHNOLOGIES, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)





 
Year ended December 31, 2014
 
 Historical
 
BPO
Business
 
Other Pro Forma Adjustments
 
Pro Forma
Synchronoss
 
 
 
 
 
 
 
 
Net revenues
$
457,314

 
$
(150,013
)
 
$

 
$
307,301

Costs and expenses:
 
 
 
 
 
 
 
Cost of services
184,414

 
(89,606
)
 
7,578

H,L
102,386

Research and development
73,620

 

 

 
73,620

Selling, general and administrative
79,227

 
(21,937
)
 
19,791

I
77,081

Net change in contingent consideration obligation
1,799

 

 

 
1,799

Depreciation and amortization
55,956

 
(8,938
)
 
8,938

 
55,956

Total costs and expenses
395,016

 
(120,481
)
 
36,307

I
310,842

Income (loss) from operations
62,298

 
(29,532
)
 
(36,307
)
 
(3,541
)
Interest income                 
1,265

 

 

 
1,265

Interest expense                
(3,430
)
 

 

 
(3,430
)
Other income (expense), net
441

 

 

 
441

Equity method investment earnings

 

 
8,860

 
8,860

Income (loss) before income tax expense
60,574

 
(29,532
)
 
(27,447
)
J
3,595

Income tax (expense) benefit   
(21,679
)
 
11,517

 
10,704

 
542

Net income (loss)
38,895

 
(18,015
)
 
(16,743
)
K
4,137

Net loss attributable to noncontrolling interests

 

 

 

Net income (loss) attributable to Synchronoss
38,895

 
(18,015
)
 
(16,743
)
 
4,137

Income effect for interest on convertible debt, net of tax
754

 

 

 
754

Net income (loss) applicable to shares of common stock for earnings per share
$
39,649

 
$
(18,015
)
 
$
(16,743
)
 
$
4,891

 
 
 
 
 
 
 
 
Net income per share attributable to Synchronoss:
Basic
$
0.96

 
 
 
 
 
$
0.10

Diluted
$
0.92

 
 
 
 
 
$
0.10

 
 
 
 
 
 
 
 
Weighted average common shares outstanding:
Basic
40,418

 
 
 
 
 
40,418

Diluted
43,297

 
 
 
 
 
40,418




5


SYNCHRONOSS TECHNOLOGIES, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)





 
Year ended December 31, 2013
 
 Historical
 
BPO
Business
 
Other Pro Forma Adjustments
 
Pro Forma
Synchronoss
 
 
 
 
 
 
 
 
Net revenues
$
349,047

 
$
(123,679
)
 
$

 
$
225,368

Costs and expenses:
 
 
 
 
 
 
 
Cost of services
146,238

 
(78,272
)
 
10,338

H,L
78,304

Research and development
64,845

 

 

 
64,845

Selling, general and administrative
62,096

 
(18,042
)
 
16,496

I
60,550

Net change in contingent consideration obligation
(5,324
)
 

 

 
(5,324
)
Restructuring charges
5,172

 

 

 
5,172

Depreciation and amortization
41,126

 
(12,558
)
 
12,558

I
41,126

Total costs and expenses
314,153

 
(108,872
)
 
39,392

 
244,673

Income (loss) from operations
34,894

 
(14,807
)
 
(39,392
)
 
(19,305
)
Interest income                 
2,646

 

 

 
2,646

Interest expense                
(3,178
)
 

 

 
(3,178
)
Other income (expense), net
217

 

 

 
217

Equity method investment earnings

 

 
4,442

J
4,442

Income (loss) before income tax expense
34,579

 
(14,807
)
 
(34,950
)
 
(15,178
)
Income tax (expense) benefit   
(11,228
)
 
5,775

 
13,631

K
8,178

Net income (loss)
$
23,351

 
$
(9,032
)
 
$
(21,319
)
 
$
(7,000
)
Net loss attributable to noncontrolling interests

 

 

 

Net (loss) attributable to Synchronoss
$
23,351

 
$
(9,032
)
 
$
(21,319
)
 
$
(7,000
)
 
 
 
 
 
 
 
 
Net income (loss) per share attributable to Synchronoss:
Basic
$
0.60

 
 
 
 
 
$
(0.18
)
Diluted
$
0.58

 
 
 
 
 
$
(0.18
)
 
 
 
 
 
 
 
 
Weighted average common shares outstanding:
Basic
38,891

 
 
 
 
 
38,891

Diluted
40,009

 
 
 
 
 
38,891






6


SYNCHRONOSS TECHNOLOGIES, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Notes to Unaudited Pro Forma Consolidated Condensed Financial Statements


The unaudited pro forma consolidated condensed balance sheet as of September 30, 2016 and the unaudited pro forma condensed consolidated statements of income for the nine months ended September 30, 2016 and for the year ended December 31, 2015, 2014, and 2013 include the following pro forma adjustments:

A.
Represents Synchronoss' cash distribution of approximately $17.3 million as part of the $100.3M consideration received in connection with the sale of 65.6%. Additionally, the buyer contributed assets for remaining 4.4% ownership in STI. Approximately $30 million has been set aside in escrow to cover certain conditions of the closing of the Sale, which is expected to be released and closed in the first half of 2017.
B.
In connection with the Sale, the billed receivables of the BPO Business were excluded from the transfer to STI. Unbilled receivables in the amount of approximately $9.0 million were transferred as part of the Sale.
C.
The total account balance will be retained by Synchronoss, in connection with the Sale.
D.
Synchronoss received a Sellers Note of approximately $83.0 million as part of the proceeds in connection with the Sale, which can be reduced or paid back in full to Synchronoss during 2017.
E.
Reflects the equity investment of 30% that Synchronoss retained in STI in connection with the Sale, which can be reduced during the course of 2017 through the exercise of a call or put option.
F.
Reflects an estimated payable for income taxes of $6.7 million and a deferred tax liability of $46.8 million as a result of the Sale.
G.
Includes the estimated after tax gain on the Sale of approximately $46.6 million as well as the impact of the balance sheet adjustments reflected in notes A through F.
H.
Reflects the inclusion of cost of services which were historically allocated to the BPO Business and will remain with the Company's continuing operations. Certain of these costs will be recovered prospectively as part of our support services agreements with STI.
I.
Reflects general corporate overhead costs, including depreciation, which were historically allocated to the BPO Business and will remain with the Company's continuing operations
J.
Represents the Company's estimated share of earnings on the retained 30% investment in the BPO Business.
K.
Reflects the pro forma tax adjustments related to the BPO Business, which were estimated using the applicable effective rate.
L.
Amounts include stock based compensation directly attributable to the BPO Business as follows:
 
Nine Months Ended
 
Year Ended December 31,
 
September 30, 2016
 
2015
 
2014
 
2013
 
(in thousands)
Cost of Services
$
1,598

 
$
1,988

 
$
1,624

 
$
1,576





7