Synchronoss Technologies NASDAQ: SNCR Investor Presentation January 2020 1 © 20202019 Synchronoss Technologies, Inc. All Rights Reserved.
Legal Disclaimers This presentation includes statements concerning Synchronoss and its future expectations, plans and prospects that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words “may,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “believes,” “potential” or “continue” or other similar expressions are intended to identify forward-looking statements. Synchronoss has based these forward-looking statements largely on its current expectations and projections about future events and financial trends that it believes may affect its business, financial condition and results of operations. These forward-looking statements speak only as of the date of this press release and are subject to a number of risks, uncertainties and assumptions including, without limitation, risks relating to the Company’s ability to sustain or increase revenue from its larger customers and generate revenue from new customers, the Company’s expectations regarding expenses and revenue, the sufficiency of the Company’s cash resources and its ability to satisfy or refinance its existing debt obligations, the Company’s growth strategies, the anticipated trends and challenges in the business and the market in which the Company operates, the Company’s expectations regarding federal, state and foreign regulatory requirements, the pending lawsuits against the Company described in its most recent SEC filings, and other risks and factors that are described in the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 and Quarterly Report on Form 10-Q for the quarter ended September 30, 2019, which are on file with the SEC and available on the SEC’s website at www.sec.gov. The company does not undertake any obligation to update any forward-looking statements contained in this presentation as a result of new information, future events or otherwise. 2 © 2019 Synchronoss Technologies, Inc. All Rights Reserved. Synchronoss Confidential & Proprietary
Synchronoss Technologies at a Glance . We are a Software Services Company, providing transformative SaaS and PaaS offerings to the TMT market. . NASDAQ: SNCR . 2018 Revenue: $326 million . Market capitalization: $271 million (1/14/2020) . 200+ Customers, 1,500 Employees, 135+ Patents . Newly configured leadership team driving significant turnaround and refocus of business model: NEW MARKETS NEW FOCUS NEW CHANNELS NEW MODELS EXPANDING GROWING SCALING TRANSITION From Operators to From Domestic to Via Partnerships From License to TMT Global Recurring Increasing New Customer Increasing Reach and Increased Sales Velocity, Increasing Opportunities Scale Lower Costs Predictability 3 © 2019 Synchronoss Technologies, Inc. All Rights Reserved. Synchronoss Confidential & Proprietary
Our Golden Thread: What We Do We help companies maximize growth, reduce operating costs and improve customer experiences and engagement in order to be competitive. CLOUD MESSAGING DIGITAL IoT 50% of 20% of 30% of New revenue revenue revenue Business Note: Revenue percentages based on trailing twelve months ended 9/30/19 4 © 2019 Synchronoss Technologies, Inc. All Rights Reserved. Synchronoss Confidential & Proprietary
Synchronoss Cloud Platform A platform that provides operators new service revenue for personal data storage, content transfer and faster device set‐up, while also improving subscriber churn. New U.S. based Tier 1 carrier expected to Personal Cloud: Store, Sync and Engagement launch Synchronoss white label cloud in 2020 in Subscriber Media from any device 2019: TracFone launching first brand on IN Synchronoss white label cloud in January Content Transfer: Wirelessly transfer content 3.5B+ 2020 Personal Cloud from/to a device, all OS’s, cloud in retail, Users (2019) AT&T selects Synchronoss OPPORTUNITY online Statista.com 2019 Out‐of‐the‐Box‐Experience Solution Out of the Box Experience (OOBE): Wirelessly to Deliver Mobile Offers to its Subscribers ANNOUNCED PRODUCTS: transfer content from/to a device, all OS’s, White‐label cloud agreement with Assurant MARKET $80B cloud in retail, online 5‐year extension of BT white‐label cloud DEALS Global opportunity agreement by 2020 Switcher: Initiate MNO “switch” to simplify GLOBAL Nasdaq and reduce time at retail, online NEW 5 © 2019 Synchronoss Technologies, Inc. All Rights Reserved. Synchronoss Confidential & Proprietary
Synchronoss Cloud Applications Personal App Retail, Online Device Set Up Retail, Online Personal Cloud Content Transfer O.O.B.E. Switcher Store, Sync and Wirelessly Embedded in device Initiate MNO Engagement in transfer content setup with service “switch” to simplify Subscriber Media from/to a device, promotion, upgrades and and reduce time at from any device all OS’s, cloud in provisioning (Android) retail, online retail, online 6 © 2019 Synchronoss Technologies, Inc. All Rights Reserved. Synchronoss Confidential & Proprietary
Synchronoss Messaging Platform An end‐to‐end platform and client suite that creates an advanced messaging experience that powers a third‐party commerce ecosystem. Messaging as a Platform: Integration of Phase II of Japan Advanced Messaging messaging technology into Operator networks Partnership 2019: and devices. IN 4B+ Selected by CCMI joint venture of AT&T, Global messaging Messaging Marketplace: A real‐time portal for Sprint, T‐Mobile, and Verizon to roll out users OPPORTUNITY brand onboarding and consumer engagement. Statista.com, 2018 RCS‐based advanced messaging in the United States. Advanced Messaging App: RCS‐powered ANNOUNCED PRODUCTS: application that delivers P2P and A2P MARKET $1B+ experiences. DEALS Annual revenue from WeChat, LINE, KakaoTalk GLOBAL Company Financials, 2019 NEW 7 © 2019 Synchronoss Technologies, Inc. All Rights Reserved. Synchronoss Confidential & Proprietary
A2P Messaging is Redefining How we Communicate Messaging is consumers preferred communication 100B A2P Messages / Yr. channel. SMS Traffic will migrate to RCS. The number of US Market (SMS Today) RCS Messages/User will exceed SMS. Mobile Squared 2019 Report Customers are about to get a serious upgrade in functionality, delivering higher engagement and a better experience through RCS. MESSAGING EMAIL APPS 98% 20% 20% Open Rate Open Rate Open Rate 90 Seconds 2% 2% Response Time Response Rate Response Rate A2PSMS is a $650M Annual Market today and growing 8 © 2019 Synchronoss Technologies, Inc. All Rights Reserved. Synchronoss Confidential & Proprietary
Advanced Messaging Solution US Carriers Messaging Joint Venture (CCMI) delivers an enhanced end user experience, ubiquitous interoperability, greater economies of scale and single business model for brands IMPLEMENTATION SERVICES MESSAGING MESSAGING RCS MARKETPLACE AS A MOBILE (MMP) PLATFORM CLIENT (MAAP) Joint Venture Brand Onboarding A2P/P2A Messaging Carrier Admin Transmission & Brand Mgt Console Routing (Campaign into Carrier Orchestration) Networks BUSINESS Analytics MOBILE USERS SUBSCRIBERS (ADVERTISERS) END USERS HOSTING SERVICES MANAGED SERVICES MAINTENANCE & SUPPORT SERVICES 9 © 2019 Synchronoss Technologies, Inc. All Rights Reserved. Synchronoss Confidential & Proprietary
Advanced Messaging Opportunity Synchronoss Revenue Components US A2P SMART PHONES ADDRESSABLE MARKET License Revenue 1x Revenue Recurring Revenue (SMS & RCS) Implementation Managed Mobile Client Services Services/Hosting 260M+ MaaP Initial & Future MaaP Licenses purchases derived by volume of messages passed US ANDROID SMARTPHONE MARKET MMP through the MaaP software (ADDRESSABLE RCS) 125M MORE MORE MORE MESSAGES USERS CONTENT MORE > $ MORE > $ MORE> $ 100B A2P Messages / Year 3 JAPAN CARRIERS 4 U.S. CARRIERS US Market (SMS Today) Mobile Squared 2019 Report 120mm subs 300mm subs Expected to grow to 121B A2P/P2A Messages by 2023 (SMS + RCS) Legend: Monthly Active User: Active end user of the service Mobile Client: Client software downloaded or preinstalled on an RCS device Message: A2P or P2A Messages exchanged between users & brands (RCS & SMS) 10 © 2019 Synchronoss Technologies, Inc. All Rights Reserved. Synchronoss Confidential & Proprietary
Synchronoss Digital Platform A next gen platform layered over existing legacy systems platform that creates and manages digital experiences and journeys, across all channels, in real time. Multi‐country pilot with British American Journey Creator: A low/no‐code, drag and drop tool Tobacco set for customer journey creation and management. 2019: DXP agreement with Indosat Ooredoo IN 94% Journey Integrator: Seamlessly integrates into any legacy IT system, extracting data, workflows and Customers frustrated by DXP agreement with Amazon poor experiences enterprise services. OPPORTUNITY Thunderhead, 2019 Journey Publisher: Ability for Journey Creator to Financial Analytics deal and DXP reseller agreement with Rackspace instruct and populate existing UI in any existing ANNOUNCED PRODUCTS: MARKET channel – dramatically reduces need for software $14.5B releases. Expected spend on Digital Journeys agreements with DEALS customer experience Wireless Advocates and Telkom Indonesia Data Analytics: Insights and AI to track and GLOBAL management in 2024 NEW Statista, 2019 fine‐tune the effectiveness of customer journeys. 11 © 2019 Synchronoss Technologies, Inc. All Rights Reserved. Synchronoss Confidential & Proprietary
DXP Solves a Critical Problem in Experience Management Today… Now, Digital Journeys creates… There is a hole in the IT Stack “An Omni‐Channel Experience” ONE TEAM . All channels must be integrated to back end . Coordinated pause and resume customer experiences . Each channel requires its own work flow . Agile teams of IT and marketing working closely together . Each customer experience is hand coded . Increased NPS from seamless, insightful experiences 12 © 2019 Synchronoss Technologies, Inc. All Rights Reserved. Synchronoss Confidential & Proprietary
Synchronoss IoT Platform A platform that unifies utility and security systems and data into a cloud‐based, single dashboard that provides near real‐time controls and insights on building management. Differentiated Dashboards: Configurable New Smart Buildings partnerships with dashboards customized for the needs of different CityFM, Accruent, Microsoft, Arrow 2019: stakeholders in facility management. Electronics, and Tridium IN 3.3B+ M2M connections System and Sensor Integration: Integration Completed Smart Buildings proof of by 2021 of power, water, HVAC, security and other concept with Rackspace OPPORTUNITY Cisco, 2017 control points. Commercial launch of AT&T IoT Smart ANNOUNCED Synchronoss Insights Platform (SIP): PRODUCTS: Cities initiative –first two customers MARKET Data aggregation and applied insights $1T+ across systems. DEALS Spend by 2020 GLOBAL Command and Control Panel: A single control IDC, 2017 point for utilities and security systems and data. NEW 13 © 2019 Synchronoss Technologies, Inc. All Rights Reserved. Synchronoss Confidential & Proprietary
Traditional LOCKED SYNCHRONOSS SMART BUILDINGS Legacy Building Systems is a single pane of glass to interact with different systems and sensors. MULTIPLE PORTALS SYSTEM LIGHTING SYSTEM SURVEILLANCE ACCESS CONTROL BUILDING CONTROLS SYSTEMS CONTROLLER HVAC SYSTEM SYSTEM METERS 14 © 2019 Synchronoss Technologies, Inc. All Rights Reserved. Synchronoss Confidential & Proprietary
Synchronoss Financial Overview David Clark, Chief Financial Officer INVESTOR DAY 2019 15 © 2019 Synchronoss Technologies, Inc. All Rights Reserved.
Financial Priorities Continued cost reduction / drive continued improvement in operating leverage Optimize capital structure Continue to improve investor understanding of Synchronoss value proposition Complete Control Remediation 16 © 2019 Synchronoss Technologies, Inc. All Rights Reserved. Synchronoss Confidential & Proprietary
Third Quarter 2019 Results CONTINUED IMPROVEMENT IN PROFITABILITY (000s) Q3 Q3 9 mos 9 mos 2019 2018 2019 2018 Revenue (Pre-STI Writedown) $78,210 $83,286 $244,161 $243,737 GAAP Revenue 52,210 83,286 218,161 243,737 Adjusted Gross Profit 43,596 40,607 138,799 119,396 Adjusted Gross Margin 55.7% 48.8% 56.9% 49.0% Adjusted EBITDA 5,799 9,360 21,098 (1,413) Operating Expenses 67,580 74,201 199,802 237,912 GAAP Net Loss (69,432) (54,529) (122,049) (141,839) Non-GAAP Net Loss from Continuing Operations (6,901) (10,726) (18,750) (46,621) 17 © 2019 Synchronoss Technologies, Inc. All Rights Reserved. Synchronoss Confidential & Proprietary
Financials Are Improving ADJUSTED EBITDA TREND Quarterly EBITDA Trend ($mil) 9 Mos 2019 vs. 9 Mos 2018 ($mil) $20.0 $25.0 $15.4 9 Mos 2019 $15.0 $20.0 $9.4 $8.7 $10.0 $6.6 $15.0 $5.8 $5.0 $10.0 $21.1 ($10.8) $0.0 $0.0 Q2 2018 Q3 2018Q4 2018 Q1 2019 Q2 2019 Q3 2019 $5.0 ($5.0) 9 Mos 2018 ($10.0) $0.0 Q1 2018 ($15.0) ($5.0) . Consistent improvement in Adjusted EBITDA . Year over year improvement in adjusted EBITDA demonstrates effectiveness of 2018 cost reduction efforts 18 © 2019 Synchronoss Technologies, Inc. All Rights Reserved. Synchronoss Confidential & Proprietary
Improving Earnings Leverage Due to Cost Reduction Efforts Adjusted Gross Margin –Year Over Year Improvement Adjusted EBITDA Margin –Year Over Year Improvement 58.00% 10.0% 9.0% 56.00% 8.0% 54.00% 7.0% 52.00% 6.0% 50.00% 5.0% 4.0% 48.00% 3.0% 46.00% 2.0% 44.00% 1.0% 0.0% 42.00% 9 mos 18 9 mos 19 40.00% Q3 18 Q3 19 Significant improvement in gross margin and EBITDA margin throughout 2018 and 2019 Earnings leverage driven by cost reduction efforts – transition from data centers to cloud for storage, office consolidation, headcount reductions, etc. 19 © 2019 Synchronoss Technologies, Inc. All Rights Reserved. Synchronoss Confidential & Proprietary
Capital/Financing Strategy ACTION TIMING Pay off balance of convertible notes STEP 1 Current balance: $47.1 million Completed August 2019 Explore working capital financing for additional capital flexibility STEP 2 • Bank line of credit Completed October 2019 • Supply chain financing • Factoring Preferred stock PIPE can be prepaid without Evaluate long term capital needs STEP 3 penalty in August 2020 20 © 2019 Synchronoss Technologies, Inc. All Rights Reserved. Synchronoss Confidential & Proprietary
Series A Convertible Participating Perpetual Preferred Stock Holder: Siris Capital Original Issue Amount: $185 million Dividend: 14.5% per annum, payable in kind or in cash at Company’s sole discretion Issue Date: February 15, 2018 Maturity: February 15, 2023 At maturity, company has the option to issue a senior unsecured note with principal equal to the Redemption Price and interest rate equal to the Dividend Rate with an additional term to maturity of one year Prepayment: SNCR has the option to prepay without penalty beginning August 15, 2020 Redemption Value: $243.1 million through August 15, 2020 (including prepayment penalty) 21 © 2019 Synchronoss Technologies, Inc. All Rights Reserved. Synchronoss Confidential & Proprietary
Summary We are participating in We have existing We are penetrating new We are participating in large markets with relationships to leverage vertical markets through recurring revenue growth potential across our portfolio direct and partner business models that channels scale with time 22 © 2019 Synchronoss Technologies, Inc. All Rights Reserved. Synchronoss Confidential & Proprietary
Thank You 23 © 2019 Synchronoss Technologies, Inc. All Rights Reserved.
Appendix 24 © 2019 Synchronoss Technologies, Inc. All Rights Reserved.
Reconciliation of GAAP to non-GAAP Financial Measures – Adjusted EBITDA ($000s, unaudited) 25 © 2019 Synchronoss Technologies, Inc. All Rights Reserved. Synchronoss Confidential & Proprietary
Reconciliation of GAAP to non-GAAP Financial Measures ($000s, unaudited) 26 © 2019 Synchronoss Technologies, Inc. All Rights Reserved. Synchronoss Confidential & Proprietary