Synchronoss Technologies, Inc. Q2 FY2025 earnings call

• Strategic transformation to a leading global cloud solutions provider with improved profitability. - Received final federal CARES Act tax refund of $3.7 million, totaling $33.9 million, which helped reduce debt and strengthen financial position. - Achieved 9% year-over-year reduction in operating expenses. - Released Personal Cloud version 25.5 with enhanced AI functionality. - Self-certified under EU-U.S. data privacy framework certification. - Updates on core customers: AT&T with sustained subscriber growth, Verizon expanding retail presence, SoftBank expanding into digital channels, and Capsyl gaining traction with Telkomsel. - Macroenvironmental uncertainties including tariffs and economic fluctuations noted.

Revenue for the quarter was $42.5 million, up slightly from $42.2 million in the prior quarter. Adjusted EBITDA was $12.8 million with an adjusted EBITDA margin of 30.2%. Recurring revenue was 92.6% of quarterly total. The company received a total CARES Act tax refund of $33.9 million, including $5.2 million in interest, with $25.4 million used to prepay the term loan and $8.5 million remaining for operational flexibility. Total operating expenses decreased 9% year-over-year from $39.2 million to $35.6 million.

• Reaffirmed 2025 outlook: revenue $170-180 million, adjusted gross margin 78-80%, recurring revenue at least 90% of total revenue, adjusted EBITDA $52-56 million, free cash flow $11-16 million. - Prepayment of term loan means no scheduled amortization payment prior to 2028, providing more free cash flow over next three years.

• Macroeconomic uncertainties such as tariffs, global trade tensions, and broader economic fluctuations. - U.S. carriers facing elongated device upgrade cycles and multiyear price locks, prioritizing value-added services.

Q: Just a couple of questions. The foreign exchange, is that going to be an ongoing noncash expense?

A: Jon, it's similar to the first quarter, that foreign exchange item is the reevaluation of our intercompany payables and receivables and really ties to the strength of the dollar as it relates primarily to the euro. There's been the constantly strengthening position of the dollar. And it's very hard for us to predict how that fluctuation will happen in the future. So I do think there will be some level of performance there. Hopefully, it won't continue to be as negative it is. But again, it's a noncash item for us.

Q: And then going forward, the debt restructuring, is that all done? Or are you going to keep like amortizing those expenses?

A: So the debt cost, Jon, that we recorded, there will be pieces in the third and fourth quarter that flow through. But in terms of the P&L impact, that's primarily now behind us.

Q: And then when you say you're going to get one new customer, does that mean like AT&T type customer or any kind of customer?

A: We have conversations, Jon. Yes, we have conversations going on with actually a wide variety of customers, prospects in a wide variety of geographies. Some represent similar scale to AT&T. Some of them are smaller. Some of them are primarily mobile and some are broadband and mobile. So we do have a number of prospects. What we're indicating now is that we've made enough progress through enough of these customer conversations that we expect to have at least one new customer contract in before the end of the year and contributions made by those customers as we enter 2026.

Q: And your guidance would imply a somewhat stronger second half. Is that...

A: Yes, that's correct.