SYNCHRONOSS TECHNOLOGIES INC Q2 FY2024 earnings call

Key Highlights - Continued execution on strategic transformation to global cloud solutions provider with subscriber growth, revenue growth, and strong adjusted EBITDA and cash flow. - Successfully repurchased all outstanding preferred stock and some senior notes, improving capital structure and reducing cost of capital. - Divested non-core businesses, allowing focus on higher margin core cloud business, leading to revenue and EBITDA growth, improved profitability, and positive net income since divestitures. - Appointed Junji Nishihara as country manager for Japanese operations, seeing Japan as a significant growth opportunity. ### Financial Details - $75 million term loan financing in June reinforced financial position, repurchased preferred stock and senior notes, reducing cost of capital. - Q2 total revenue $43.5 million vs $41 million prior year, up 5.9%. Adjusted gross profit $33.7 million (77.5% of revenue) vs $30 million (73.2%) prior year. Income from operations $4.3 million vs loss of $5.1 million prior year. Net income $78,000 vs loss of $11 million prior year. Adjusted EBITDA $13 million (29.9% margin) vs $6.1 million (14.8%) prior year.

In the second quarter, Synchronoss generated revenue of $43.5 million, up 5.9% year-over-year. The cloud solutions segment was the driver, with 6.1% year-over-year cloud subscriber growth. Adjusted gross margin was 77.5% ($33.7 million) in Q2, compared to 73.2% ($30 million) in the prior year. Net income was $780,000, a significant improvement from the prior year's loss. Adjusted EBITDA was $13 million, representing a 29.9% margin, up from 14.8% in the prior year.

Full-Year Guidance - Revised adjusted gross margin range to 73%-77% from 70%-75%. - Revised adjusted EBITDA range to $43M-$46M from $42M-$45M. - Revenue to range $170M-$175M (5.8% growth year-over-year). - Recurring revenue 85%-90% of total revenue. - Net free cash flow at least $10M. ### Long-Term Targets - Double-digit revenue growth, recurring revenue at least 90% of total revenue, adjusted gross margin at least 75%, adjusted EBITDA margin at least 30%, and continued positive free cash flow over two to three years.

Q: Can you elaborate on the cost savings from the legal end of the legal issues with the former management?

A: We had been incurring regular expenses for legal costs related to former Controller and CFO, but those go away now, which is great.

Q: And then I also had a question about you paid income taxes this quarter you a little unusual at least the amount -- can you elaborate on that?

A: We recorded an accrual for the provision for income taxes as we are a positive net income producing company now, bringing us up to date for expected cash taxes of between $1.5 million and $2 million in 2024.

Q: Did you say you expect double-digit revenue growth in the future like long-term future or next year future?

A: That would be the next two to three years' expectation.

Q: Could you give some color on what percentage of subscribers are on a prepaid plan basis? And how is that category growing?

A: Prepaid subscriber base represents less than 5% of overall subscriber base. Business is primarily postpaid, but we see long-term opportunity in prepaid/value segment with Verizon and AT&T.

Q: Do you expect a sequential revenue growth in 3Q?

A: You should expect growth similar or consistent with the quarter we just had, remaining on track for 5%-8% annualized revenue growth.