ANNUAL REPORT2023
“
In 2023, we streamlined our
business and strengthened our
market position to place
Synchronoss at the forefront of
the evolving Cloud industry.
”
Jeff Miller,
President and CEO, Synchronoss
Fellow Shareholders,
2023 was a pivotal year for Synchronoss, characterized by strategic changes to our business model that will transform our company's
direction, strengthen our growth potential, and establish Synchronoss as a dedicated global Cloud solutions provider.
Synchronoss entered 2023 with a mixed product portfolio, led by Personal Cloud. Our ability to consistently deliver cloud subscriber
and cash growth, along with market indices pointing to significant growth potential in the personal cloud sector, prompted us to
explore alternatives designed to streamline the business and maximize shareholder value.
After participating in a robust strategic process, we announced the divestiture of our Messaging and NetworkX operations to Lumine
Group in Q4. Selling our non-core assets allowed us to simplify our business operations and focus our resources to capitalize on un-
tapped opportunities in the evolving Cloud market. This simplified Cloud-centric business model also paves the way for us to easily
convey Synchronoss’ strategy, product offerings and market presence to investors, workforce candidates, customers, and other
stakeholders.
In the fourth quarter of 2023, we achieved our 15th consecutive quarter of greater than 9% Cloud subscriber growth. Our annual
EBITDA performance saw marked improvements with an increase of 13.4% from $27.7M in 2022 to $31.4M in 2023, and our EBITDA
margin rose from 15.9% to 19.1% year over year. We also reported year over year revenue growth for Cloud in the 2nd half of 2023, and
strengthened our liquidity position, generating positive net cash flow of $2.7M. We believe these results will continue to improve
and will demonstrate the potential for growth of the Cloud-dedicated business.
Contributing to our success is our industry-leading customer portfolio which boasts Verizon, AT&T, BT, and SoftBank. These partners
rely on Synchronoss Personal Cloud™ to provide their subscribers with the world class data privacy, unlimited storage solutions,
cross-platform interoperability, and AI-driven capabilities of our Personal Cloud solution.
This past year, we proudly celebrated our 10-year anniversary with Verizon and extended our contract with the telecom powerhouse
through 2030, exercised an extension of our partnership with AT&T, and launched SoftBank's Anshin Data Box powered by Synchronoss
Personal Cloud. As a result, more than 75% of our total revenue is now under contract with at least 4-year terms to support our growth
expectations.
To further optimize our new business model, we revised our organizational structure. Through this effort we consolidated management
layers and restructured employee teams to cultivate a leaner and more efficient workforce ideally suited to innovate and adapt to the
changing demands of our customers and the industry. We also welcomed Kevin Rendino, Chairman and CEO of 180 Degree Capital, to
our Board of Directors, bringing additional financial expertise and market insights to help guide the business forward.
Our strategy for 2024 is shaped by our singular focus to deliver preeminent, carrier-grade Cloud solutions. The steps taken in 2023 are
intended to streamline our business model, strengthen our market position, and set the stage for Synchronoss to be at the forefront of
the evolution taking place within the Cloud industry. We look forward to the year ahead and are steadfast in our commitment to
providing exceptional value to our shareholders while staying at the leading edge of innovation.
Jeff
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒
☐
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2023
Or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 001-40574
SYNCHRONOSS TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
200 Crossing Boulevard, 8th Floor
Bridgewater, New Jersey
(Address of principal executive offices)
06-1594540
(I.R.S. Employer
Identification No.)
08807
(Zip Code)
(866) 620-3940
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, $.0001 par value
8.375% Senior Notes due 2026
Trading Symbol(s)
SNCR
Name of each exchange on which registered
The Nasdaq Stock Market, LLC
SNCRL
The Nasdaq Stock Market, LLC
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes ☒ No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to
Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was
required to submit such files). Yes ☒ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,
”and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐
Accelerated filer ☒
Non-accelerated filer ☐
Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its
internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.7262(b)) by the registered public
accounting firm that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements. ¨
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based
compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based
compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
The aggregate market value of the common stock held by non-affiliates of the Registrant as of June 30, 2023, the last business day of the
Registrant’s last completed second quarter, based upon the closing price of the common stock as reported by The Nasdaq Stock Market on
such date was approximately $71.1 million. Shares of common stock held by each executive officer, director and stockholders known by the
Registrant to own 10% or more of the outstanding stock based on public filings and other information known to the Registrant have been
excluded since such persons may be deemed affiliates. This determination of affiliate status is not necessarily a conclusive determination for
other purposes.
As of March 13, 2024, a total of 10,311,380 shares of the Registrant’s common stock were outstanding.
The exhibit index as required by Item 601(a) of Regulation S-K is included in Item 15 of Part IV of this report on Form 10-K.
DOCUMENTS INCORPORATED BY REFERENCE
Information required by Part III (Items 10, 11, 12, 13 and 14) is incorporated by reference to portions of the Registrant’s definitive Proxy
Statement for its 2024 Annual Meeting of Stockholders (the “Proxy Statement”), which is to be filed pursuant to Regulation 14A within
120 days after the end of the Registrant’s fiscal year ended December 31, 2023. Except as expressly incorporated by reference, the Proxy
Statement shall not be deemed to be a part of this report on Form 10-K.
SYNCHRONOSS TECHNOLOGIES, INC.
FORM 10-K INDEX
Page No.
Item
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1B.
1C.
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Business
Risk Factors
Unresolved Staff Comments
Cybersecurity
Properties
Legal Proceedings
Mine Safety Disclosures
PART I
PART II
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Directors and Executive Officers and Corporate Governance
Executive Compensation
PART III
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions
Principal Accounting Fees and Services
PART IV
Exhibits and Financial Statement Schedules
Form 10-K Summary
15.
16.
Signatures
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FORWARD LOOKING STATEMENTS
PART I
The words “Synchronoss,” “we,” “our,” “ours,” “us” and the “Company,” refer to Synchronoss Technologies, Inc. and its
consolidated subsidiaries. All statements in this Annual Report on Form 10-K for the fiscal year ended December 31, 2023 that
are not historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended, including statements regarding Synchronoss’
“expectations,” “beliefs,” “hopes,” “intentions,” “anticipates,” “seeks,” “strategies,” “plans,” “targets,” “estimations,” “outlook”
or the like. Such statements are based on management’s current expectations and are subject to a number of factors and
uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Past
performance is not necessarily indicative of future results. Synchronoss cautions investors that there can be no assurance that
actual results or business conditions will not differ materially from those projected or suggested in such forward-looking
statements as a result of various factors. We encourage you to read Management’s Discussion and Analysis of our Financial
Condition and Results of Operations and our consolidated financial statements contained in this Form 10-K. We also encourage
you to read Item 1A of Part I of this Form 10-K, entitled Risk Factors, which contains a more complete discussion of the risks
and uncertainties associated with our business. In addition to the risks described in Item 1A of this Form 10-K, other unknown
or unpredictable factors also could affect our results. Therefore, the information in this Form 10-K should be read together with
other reports and documents that we file with the Securities and Exchange Commission from time to time, including on Form
10-Q and Form 8-K, which may supplement, modify, supersede or update those risk factors. Synchronoss expressly disclaims
any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to
reflect any change in Synchronoss’ expectations with regard thereto or any change in events, conditions, or circumstances on
which any such statements are based.
This Form 10-K includes industry and market data that we obtained from periodic industry publications, third-party studies
and surveys, filings of public companies in our industry and internal company surveys. These sources include government and
industry sources. Industry publications and surveys generally state that the information contained therein has been obtained
from sources believed to be reliable. Although we believe the industry and market data incorporated into this Form 10-K to be
reliable, this information could prove to be inaccurate. Industry and market data could be wrong because of the method by
which sources obtained their data and because information cannot always be verified with complete certainty due to the limits
on the availability and reliability of raw data, the voluntary nature of the data gathering process and other limitations and
uncertainties. In addition, we do not know all of the assumptions regarding general economic conditions or growth that were
used in preparing the forecasts from the sources relied upon or cited herein.
ITEM 1. BUSINESS
Overview
Synchronoss Personal CloudTM is an innovative software that drives revenue growth and consumer engagement for global
network operators and mobile insurance providers. We help our customers to connect, engage and monetize subscribers in more
meaningful ways by providing trusted platforms through which end users can sync, organize and protect all of their digital
content, connect with one another and enjoy precious memories. Our mission is to help our customers create new revenue
streams, reduce the cost of innovation, and captivate their subscribers.
Divestiture of the Messaging and NetworkX businesses
On October 31, 2023, Synchronoss Technologies, Inc. entered into an Asset Purchase Agreement with Lumine Group
Software Solutions (Ireland) Limited, pursuant to which the Company sold its Messaging and NetworkX businesses. This
transaction represents a strategic shift designed to maximize shareholder value and allow the Company to solely focus on
providing cloud-centric solutions. In connection with the sale transaction, the Company determined its Messaging and
NetworkX Businesses qualified for discontinued operations accounting treatment in accordance with ASC 205-20.
Accordingly, the operating results of, and costs to separate the Messaging and NetworkX businesses are reported in Net loss
from discontinued operations, net of taxes in the Consolidated Statements of Operations for all periods presented. In addition,
the related assets and liabilities held prior to the sale are reported as Assets and liabilities of discontinued operations on the
Consolidated Balance Sheets. The notes to the financial statements have been adjusted on a retrospective basis. For additional
4
information, see Note 4. Divestitures and Discontinued Operations of the Notes to Consolidated Financial Statements in Part II,
Item 8 of this Form 10-K.
Who We Serve
At Synchronoss we focus on delivering carrier-grade solutions to three markets globally: communications service
providers/multi-service operators (such as cable and mobile network operators), mobile insurance providers and retailers. We
help our customers accelerate and monetize value-added services to drive growth, facilitate retention and enable differentiated
experiences. In 2023, we continued to strengthen our focus through the asset sale of our Messaging and Digital businesses to
Lumine.
Communications service providers, multi-service operators and mobile insurance providers market white label
implementations of our Synchronoss Personal CloudTM products and solutions to their subscribers around the world. Our
customers market and re-sell the services powered by our technology to their subscribers as part of stand-alone subscriptions or
value-added bundles. They also use our Personal Cloud to enhance their service offerings to subscribers who purchase and lease
mobile devices and network connectivity by providing an easy solution for storing and syncing user generated content (e.g.,
videos, photos, documents, contacts, music, etc.).
Our customers include global service providers such as AT&T, BT, Verizon, and Softbank. These customers utilize our
solutions to service both consumer and enterprise customers.
How We Go to Market
We market our solutions and services directly through our sales organizations in the Americas, Europe, Middle East and
Africa (“EMEA”) and Asia-Pacific (“APAC”).
Sales
We sell our solutions, products, and services through a direct sales force, with strategic partners and in collaboration with
our customers to resell services to their end customers and subscribers. Our sales professionals are well versed in our platforms,
products and services with an understanding of market trends, demands and conditions that our current and potential customers
are facing.
Marketing
The Synchronoss marketing team, with our cloud-focused approach, is dedicated to implementing the right strategies and
employing effective tools to drive customer acquisition and accelerate our growth. Our mission is centered on developing
compelling product-specific messaging and comprehensive brand narratives through an array of channels, including digital
marketing, sales support, social media, and public relations. These strategic efforts are crucial in generating business-to-
business (B2B) sales leads, enhancing the visibility of our cloud solutions, and reinforcing our brand presence across the
telecom, insurance, and retail sectors in the North America, EMEA, and APAC regions.
To complement our B2B initiatives, we provide robust support for our partners' direct-to-consumer (D2C) marketing
activities, with the aim of driving customer adoption and subscriber growth. Through our integrated go-to-market and
awareness campaigns, orchestrated with an omnichannel approach, we ensure that consumers are engaged at every pivotal point
in the purchase lifecycle. This includes interactions during online checkout, retail engagements, customer support, the initial
setup of products, and via in-app notifications for devices pre-installed with our cloud application. These initiatives are a clear
demonstration of our dedication to delivering not only a secure and user-centric cloud experience but also to empowering
service providers and consumers alike with a platform that champions data integrity and propels user engagement.
What We Deliver - Synchronoss Personal CloudTM Platform
The Synchronoss Personal CloudTM solution is designed to create an engaging and trusted customer experience through
ongoing content management and engagement. The Synchronoss Personal CloudTM platform is a secure and highly scalable,
white label platform that allows our customers’ subscribers to backup and protect, engage with, and manage their personal
content and gives our operator customers the ability to increase average revenue per user (“ARPU”) and reduce churn.
5
Our Synchronoss Personal CloudTM platform is specifically designed to support smartphones, tablets, desktops computers,
and laptops.
Messaging Platform (Owned and operated through October 31, 2023)
Synchronoss’ Messaging platform powers mobile messaging and mailboxes for hundreds of millions of telecommunication
subscribers. Our Advanced Messaging platform is a powerful, secure, intelligent, white label messaging platform that expands
capabilities for communications service provider and multi-service providers to offer P2P messaging via Rich Communications
Services (“RCS”). Our Mobile Messaging Platform (“MMP”) is poised to provide a single standard ecosystem for onboarding
and management to brands, advertisers and message wholesalers.
•
•
Advanced Messaging: Our Advanced Messaging platform supports rich messaging channel in both RCS and other
Real-Time Communication (“RTC”); it enables rich, P2P communications and creates new commerce and revenue
opportunities across channels via A2P experiences for our customers and other brands. Our messaging platform
operates in tandem with Messaging-as-a-Platform (“MaaP”) Messaging Marketplace as well as dedicated, third-party
clients and native original equipment manufacturer (“OEM”) clients, providing an end-to-end messaging platform and
monetization tools to the operators, Communications-Platform-as-a-Service (“CpaaS”) players and brands.
E-Mail: Our Email suite provides service providers with a secure, white label, back-end framework for a branded
email service that provides the opportunity to introduce and promote services that can be monetized. Our carrier
branded Email Suite solution offers leading anti-virus, anti-spam and malware technology to keep the integrity and
security of the customer experience and protection of subscriber data to carrier standards. Our Email solution is an
important repository for critical communications with an intuitive and feature-rich mobile and desktop email
experience ensuring stickiness and increasing customer lifetime value.
OnboardX (Owned and operated through October 31, 2023) products simplify subscriber onboarding and drive service
adoption at scale. The first impression of a new product or service can either make or break your subscriber relationship. A
poor onboarding experience leads to revenue losses and customers feeling stranded. Our customizable service activation,
content backup, and device setup experiences make onboarding frictionless.
• Mobile Content Transfer: Our Synchronoss Mobile Content Transfer® solution is an easy-to-use product whose
client enables a secure, peer-to-peer, wireless transfer of content from one mobile smart device to another in a carrier
retail location or at home/work, etc. Our solution can transfer select data classes that may include photos, videos,
music, messages, documents, contacts, and call logs, across operating systems including iOS and Android.
• Out of Box Experience: Our Synchronoss Out of Box Experience solution is a device setup solution that assists
customers in setting up the features of their new device, including Wi-Fi, email, social network accounts and
voicemail, as well as prompting restoration of content and enrollment in a cloud service. It also offers the ability to
highlight programs and revenue generating initiatives during the setup process, such as loyalty programs, third-party
partnerships and value-added services.
NetworkX (Owned and operated through October 31, 2023) products streamline networks to be more efficient and
profitable. In a world where subscribers expect seamless connectivity and zero network interruptions, delivering superior
network quality can be complex and costly. Our physical network asset management, off-network procurement, and expense
control solutions reduce the complexity and cost of network management.
The Synchronoss NetworkX products provide operators with the tools and software to design their physical network,
streamline their infrastructure purchases, and manage and optimize comprehensive network expenses for leading top tier
carriers around the globe.
•
spatialNX: Our spatialSUITE provides enterprise-wide access to timely, accurate and comprehensive network
information – including physical location, specifications, attributes, connectivity and capacity – for every inside-plant
6
•
•
and outside-plant asset. It delivers data across the enterprise to support provisioning, planning and design,
construction, fault and event management, work order management, customer service, marketing and other critical
business functions. The automation and ease of integration of our platform is designed to enable our customers to
lower the cost of new subscriber acquisitions and enhance the accuracy and reliability of customer transactions.
ConnectNX (iNOW): Our iNOW provisioning system eliminates manual handling of service orders and manages the
full order lifecycle between customer and supplier via automation and rules-based validation. iNOW includes an
interface that powers bulk provisioning needs and an open API to seamlessly integrate to other carrier systems. iNOW
also provides an electronically bonded gateway platform enabling rapid electronic order confirmations and status
updates between bonded carriers. Finally, completed order information flows to Financial Analytics providing
integrated and automated order to billing reconciliation functionality.
ExpenseNX: Our Financial Analytics Platform is a comprehensive application suite that helps operators reduce costs,
mitigate risks, enforce financial compliance and controls, and increase operational efficiencies. Financial Analytics
ingests any supplier invoice (in any format) through a unique software-driven process – with 100% of the detail.
Invoices are managed via automated audit and payment workflow tightly coupled with a software driven dispute
management lifecycle, providing a true procurement-to-payment process on network expenses and disputes across a
carrier’s organization.
What We Deliver - Our Services
Synchronoss offers professional services including consulting, installation and deployment, configuration, customization,
systems integration and support to ensure our customers’ successful deployment and utilization of our products and solutions.
Product Development
At Synchronoss we have focused our product development efforts on expanding the functionality, scalability and security
of our products and solutions. We expect to sustain our research and development investments as we intend to continue on an
aggressive path to develop new features and functionality, upgrade and extend our product offerings and develop new
technology.
Intellectual Property
We rely principally on a combination of trademark, copyright and patent laws in the United States and other jurisdictions in
which we do business, as well as confidentiality procedures and contractual provisions, which protect our proprietary
information, technologies and strategies. We also cultivate a culture which encourages creativity and innovation amongst our
employees by maintaining a patent award program, hosting events such as an annual Innovation Jam and periodic
“hackathons.” We believe this facilitates the development of new features, functionality and products, which are essential to
establishing our solutions as the leading solutions in the industry. We enter into proprietary information and invention
agreements with all of our employees and consultants during the onboarding process and non-disclosure agreements with all
third parties.
In the United States, as of December 31, 2023 we had 45 patents issued and 7 patents pending. Internationally, as of
December 31, 2023 we had 70 patents issued and 6 pending. We hold and/or are pursuing patents in the United States,
Germany, the United Kingdom, France and Spain and we may seek additional jurisdictions to the extent we determine such
coverage is appropriate and cost efficient. Our issued patents cover all aspects of our business including cloud and security.
Demand Drivers for Our Business
With faster/higher speeds, lower latency, more capacity, enhanced security and better reliability, 5G capabilities will enable
new use cases, applications and business models that were not possible before. Consumer demand for these features alone will
shape how Operators offer 5G services and Operators in turn have the opportunity to monetize and earn differentiated revenue
streams. According to Market Research Future, Mobile Value-Added-Services (“VAS”) are set to hit $309.1 billion by 2025.
The transition to 5G provides an opportunity to strengthen their position in the consumer market and function as a service
7
enabler by bundling VAS into premium offers. Service providers should also become service creators by developing new,
immersive products under their own brand. In either case (branded and partner services) powering digital bundles and
simplifying onboarding, consumption, billing, and authentication of VAS will drive higher adoption of premium 5G service
plans and ARPU.
Beyond being a buzz word or strategy, 5G is the next wave in Communication Service Providers’ technological future. In
2023, we saw the continued adoption of 5G use cases and Operators begin to reap returns carriers were reliant on when making
their investment in 5G technology. In 2027, it is projected that North America will have the highest 5G penetration at 90
percent. 5G adoption among mid-tier smart phones also continued to abound as new devices and capabilities were introduced
by mobile phone manufacturers in 2023.
More devices will lead to more vulnerabilities around privacy, data, and hardware protection. Consumers have made it
clear; they want to understand and feel confident about how their data is being used. Service providers have proven themselves
true stewards of consumer data protection and privacy, and therefore differentiated as the market continues to develop. As the
provider of both the mobile network and fixed wireless connectivity, service providers are uniquely positioned to become the
trusted end-to-end solution of total protection services for subscribers both at home and on the go. The consumer demand
around personal cloud data protection, hardware insurance, home and network security will allow service providers to capitalize
on their trusted relationship with consumers.
We believe our white label Personal Cloud platform helps service providers accelerate the adoption of 5G service and total
protection plans. Our next generation Personal Cloud gives operators a new way to create, deliver, engage, and monetize more
personalized experiences and offers for their subscribers. When operators have millions of active users leveraging cloud, it
becomes a channel for cross selling security services, insurance, merchandise like prints & gifts, and other carrier services,
leading to a significant increase in ARPU. As a result, we are fostering new partnerships, building exciting new capabilities,
and now enabling subscribers to protect the home. Giving subscribers the ability to protect hardware investments with insurance
plans, protect their families from cyber threats with network-based security services, and their personal content - with cloud,
will differentiate the value proposition of 5G service plans and deliver significant brand value for our customers.
Personal Cloud and its data protection value proposition fits nicely into the device protection and insurance offering.
Insurance providers bundle personal cloud with the device protection to offer total device protection. Cable MSO and
broadband service providers have a unique opportunity to offer personal cloud as an ‘all home’ data protection offering which
increases ARPU and provides the much needed access to the home service provider market beyond being a connectivity and
content provider. In addition, service providers also can include personal cloud into a security bundle where consumers get data
protection combined with other features like anti-virus, password protection, VPN and more.
_____________________________
1
Ericsson June 2022 Mobility Report
Competition
Competition across our markets is incredibly diverse, dynamic and nuanced in an increasingly interconnected landscape of
rapidly changing technologies, evolving industry standards, new product introductions and converging spaces and services.
We face the following categories of competitors:
Personal Cloud
• Over-the-top (“OTT”) Service & Platform Providers - Apple, Google, Dropbox, Box, Microsoft and Amazon all
provide personal cloud services closely integrated to their respective technology or service platforms. However,
Synchronoss differentiates from these OTT Service and Platform Providers by offering operator-grade white label
solutions.
• White Label Platform Providers - The field of platform-independent, white label personal cloud providers has
consolidated in recent years with Funambol and others competing for Operator distribution deals. However, these
providers target second and third tier regional operators with low-risk, revenue share business models and do not
generally pose a real threat to Tier 1 world-wide Operators.
8
Messaging (Owned and operated through October 31, 2023)
•
The emerging RCS marketplace is intensely competitive across the globe. Leading OTT device and OS platform
providers Google and Samsung, along with prominent online platform providers such as Facebook, WhatsApp,
Instagram, WeChat and LINE have created a radically new market for communication and monetization that is turning
“messaging” into a new, virtual OS.
• Our Email suite provides service providers with a secure, white-label, back-end framework for a branded email service
that provides the opportunity to introduce and promote services that can be monetized. Our carrier branded Email Suite
solution offers leading anti-virus and anti-spam and malware technology to keep the integrity and security of the
customer experience and protection of subscriber data to carrier standards. Our Email solution is an important
repository for critical communications with an intuitive and feature-rich mobile and desktop email experience ensuring
stickiness and increasing customer lifetime value.
Digital Products (Owned and operated through October 31, 2023)
•
Telecom Expense Management (TEM) Providers –
▪
TEOCO and Tangoe are two major providers that offer wholesale and retail TEM software and services. Each
of these vendors have large customers/contracts to better account, reconcile and pay out on vendor contracts,
network circuits, roaming agreements and other complex expense areas.
•
Telecom Service Order Management Providers –
▪ Neustar supports major providers with software that handles the full order lifecycle of telecommunications
service orders.
▪ Order management applications and processes developed/utilized by Operators also present competition.
• Geospatial Network Planning Providers –
▪ Major providers of software that manage the planning and design of physical communication networks
include Bentley, GE Smallworld, and 3-GIS.
To compete against global platform providers, we offer a collection of products that help to keep subscribers, systems,
networks, and content in sync to enable a better, more engaging experience. Our white label products enable subscribers to
connect with one another, the networks they rely on, the brands they love and the services they need. We believe we compete
favorably through our differentiated product capabilities, vast reach across global markets, and our 20+ years of experience
building carrier grade solutions that are proven to scale.
Compliance and Certifications
We obtain third-party reviews of our controls relating to security. Our Synchronoss white label Personal Cloud has been
certified to be compliant with the Service Organization Controls (SOC) 2 type II audit that tests the design and operating
effectiveness of controls over time. An independent auditor tests these controls annually and addresses, among other areas, the
environmental and physical safeguards for production data centers, legal controls, change management and logical security. In
addition, our Financial Analytics hosted solution is certified to be compliant with a SOC 1 type II audit that tests the design and
effectiveness of controls related to our customers’ use of this service in financial reporting. Finally, our operations in Bangalore
are certified under ISO27000, ensuring best practices for information security management, and ISO9000, ensuring quality
management.
Human Capital
At Synchronoss, we believe that our growth and success are attributable in large part to our diverse employee base and an
experienced management team, with a mission to make Synchronoss a great place to work. We continue to invest in our
employees, as well as developing and promoting our team-oriented culture, and believe that these efforts provide us with a
sustainable competitive advantage.
As of December 31, 2023 we had 1,321 full-time employees located in India, North America, Europe, and Asia Pacific
regions.
We have a purpose-driven culture, with a focus on employee input and well-being, which we believe enables us to attract
and retain exceptional talent. We have moved to a flexible work policy, providing the majority of our employees the flexibility
9
to work remotely from off-site locations at their election. We offer learning and development programs for all employees.
Employees are able to actively voice their questions and thoughts through many internal channels, including our company town
hall meetings and employee engagement surveys.
With a continued focus on employee engagement, we formed a global Diversity, Equity, and Inclusion (DE&I) committee,
laying the groundwork to embed DE&I as part of our corporate culture and pave the way for a more comprehensive program.
We took initial steps in this space through formal trainings, employee communications, and updating our corporate language to
be more inclusive, aligned with industry’s best practices, and compatible with our DE&I philosophy. More recently, we
launched a series of employee initiatives designed to strengthen employee morale, with more to come in this area. We also
launched the Sync Cares program in 2022 to bring employees and leadership together to lend their time and talent to support
causes and communities around the globe. In our initial year hundreds of our employees volunteered and contributed a total of
over 450 hours to 15 organizations in the global communities in which we do business.
From a total rewards perspective, Synchronoss offers a competitive compensation and benefits package, which we review
and update each year. Our annual compensation planning coincides with our feedback cycle where employees and managers
have performance conversations to facilitate learning and career development. As part of our compensation review program, we
conduct pay equity analyses annually.
Corporate Information
We were incorporated in Delaware in 2000. Our principal offices are located at 200 Crossing Boulevard, Bridgewater, New
Jersey. We completed our initial public offering in 2006, and our common stock is listed on the NASDAQ Global Select
Market under the symbol “SNCR” and our Senior Notes as listed on the NASDAQ Global Select Market under the symbol
“SNCRL.”
Available Information
is
Our website
investor relations website
located at www.synchronoss.com and our
located at https://
synchronosstechnologiesinc.gcs-web.com/. We have used, and intend to continue to use, our investor relations website as a
means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD.
The following filings are available through our investor relations website after we file them with the Securities and Exchange
Commission ("SEC"): Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, current reports on Form 8-K, and our
Proxy Statement for our annual meeting of stockholders. These filings are also available for download free of charge on our
investor relations website. The SEC also maintains an Internet website that contains reports, proxy statements and other
information about issuers, like us, that file electronically with the SEC. The address of that website is www.sec.gov. The
contents of these websites are not incorporated into this filing. Further, the Company’s references to the URLs for these
websites are intended to be inactive textual references only.
is
Synchronoss and Synchronoss Personal CloudTM and other trademarks of Synchronoss appearing in this Form 10-K are the
property of Synchronoss. Other trademarks or service marks that may appear in this Annual Report are the property of their
respective holders. Solely for convenience, the trademarks and trade names in this Annual Report are sometimes referred to
without the ®, ™ and SM symbols, but such references should not be construed as any indicator that their respective owners
will not assert, to the fullest extent under applicable law, their rights thereto.
ITEM 1A. RISK FACTORS
An investment in our securities involves a high degree of risk. The following are certain risk factors that could affect our
business, financial results and results of operations. You should carefully consider the following risk factors in connection with
evaluating the forward-looking statements contained in this Form 10-K because these factors could cause the actual results and
conditions to differ materially from those projected in forward-looking statements. The risks that we have highlighted here are
not the only ones that we face. If any of the risks actually occur, our business, financial condition or results of operation could
be negatively affected. In that case, the trading price of our securities could decline, and our investors may lose part or all of
their investment.
10
Risk Factors Summary
Our business operations are subject to numerous risks and uncertainties, including those outside of our control, that could
cause our actual results to be harmed, including risks regarding the following:
Operation Risks
•
•
•
Our business may not generate sufficient cash flows from operations or future borrowings may not be available in
amounts sufficient to enable us to fund liquidity needs or capital expenditures.
Our revenue, earnings and profitability are affected by the length of our sales cycle, and a longer sales cycle could
adversely affect our results of operations and financial condition.
If we do not meet our revenue forecasts, we may be unable to reduce our expenses in a timely fashion to avoid or
minimize harm to our results of operations.
• We traditionally have had substantial customer concentration, with a limited number of customers accounting for a
substantial portion of our revenue.
• We must recruit and retain our key management and other key personnel and our failure to recruit and retain qualified
•
•
•
•
employees could have a negative impact on our business.
Our products are complex and may contain defects that are detected only after deployment.
Failure to maintain the confidentiality, integrity and availability of our systems, software and solutions could seriously
damage our reputation and affect our ability to retain customers and attract new business.
The quality of our support and services offerings is important to our customers and if we fail to meet out service level
obligations under our service level agreements or otherwise fail to offer quality support and services, we would be
subject to penalties and could lose customers.
Our reliance on third-party providers for communications software, services, hardware and infrastructure exposes us to
a variety of risks we cannot control.
• We are subject to credit risk and other risks associated with our accounts receivable securitization facility.
•
Fluctuations in foreign currency exchange rates could result in foreign currency transaction losses, which could harm
our operating results and financial condition.
Downgrades in our credit ratings may increase our future borrowing costs, limit our ability to raise capital, cause our
stock price to decline, any of which could have a material adverse impact on our business.
Our insurance policies, including general liability, errors and omissions and cyber insurance, may not totally protect
us.
•
•
Risks Related to our Business and Industry
•
The financial and operating difficulties in the telecommunications sector may negatively affect our customers and our
business.
•
•
• We recently announced our new strategy to focus on our cloud-centric solutions. There can be no guarantee that this
strategy will be successful or that we will experience consistent and sustainable profitability in the future as a result of
our new strategy.
The success of our business depends on the continued growth in demand for connected devices and the continued
availability of high-speed access to the Internet.
Our business depends substantially on customers renewing and expanding their subscriptions for our services. Any
decline in our customer renewal and expansions would harm our operating results.
The markets in which we market and sell our products and services are highly competitive, and if we do not adapt to
rapid technological change, our ability to sustain or grow revenue could be adversely affected.
Consolidation in the telecommunications, media, technology industry and other industries that we serve can reduce the
number of actual and potential customers and adversely affect our business.
•
•
Legal, Regulatory and Compliance Risks
•
Government regulation of the Internet and e-commerce and of the international exchange of certain information is
subject to possible unfavorable changes, and our failure to comply could harm our business and operating results.
• We collect, process, store, disclose and use personal information and other data, and our perceived failure to protect
•
this information and data could damage our reputation and harm our business and operating results.
If we are required to collect sales and use taxes on the services we previously sold in additional jurisdictions, we may
be subject to liability for past sales.
11
Risks Related to our Series B Preferred Stock, Senior Notes and Common Stock
Our stock price may continue to experience significant fluctuations and could subject us to litigation.
•
• We have, and in the future may be, the target of stockholder derivative complaints or other securities related legal
•
actions that could adversely affect our results of operations and our business.
Delaware law and provisions in our restated certificate of incorporation and amended and restated bylaws could make
a merger, tender offer or proxy contest difficult, therefore depressing the trading price of our common stock.
• We have incurred (and expect to continue to incur) significant costs in connection with the restatement of previously
•
•
•
•
•
•
issued consolidated financial statements.
Our current or future debt securities or preferred equity securities, which would be senior to our common stock, may
adversely affect the market price of our common stock.
B. Riley Financial, Inc., 180 Degree Capital Corp., and their respective affiliates have significant influence over us and
may have conflicts of interest with us or other stockholders.
The Senior Notes are unsecured and therefore are effectively subordinated to any secured indebtedness that we
currently have or that we may incur in the future.
The Senior Notes are structurally subordinated to the indebtedness and other liabilities of our subsidiaries.
The indenture under which the Senior Notes were issued contains limited protection for holders of the Senior Notes.
A 1% U.S. federal excise tax may be imposed upon us in connection with the redemptions by us of our Series B Non-
Convertible Perpetual Preferred Stock or other redemptions or repurchases of our equity.
Operation Risks
Our business may not generate sufficient cash flows from operations, or future borrowings which may not be available to
us, in amounts sufficient to enable us to fund our liquidity needs and capital expenditure requirements necessary to expand
our operations and invest in new products which could reduce our ability to compete and could harm our business.
We cannot guarantee that we will be able to generate sufficient revenue or obtain enough capital to fund our capital
expenditures, service our debt and execute on our business strategy. We may be more vulnerable to adverse economic
conditions than our competitors and thus less able to withstand competitive pressures. We intend to continue to make
substantial investments to support our business growth and may require additional funds to respond to business challenges,
including the need to develop new products and enhancements to our platforms or acquire complementary businesses and
technologies. Accordingly, we may need to engage in equity or debt financings to secure additional funds. If we raise additional
capital, our stockholders may experience significant dilution of their ownership interests, and the per share value of our
common stock could decline. In addition, the terms of any future issued equity securities could entitle the holders of those
equity securities to rights, preferences and privileges superior to those of holders of our securities. Furthermore, if we engage in
additional debt financings, the holders of debt might have priority over the holders of our securities, and we may be required to
accept terms that restrict our ability to incur additional indebtedness, including restrictive covenants relating to our capital
raising activities and other financial and operational matters, including restricting our ability to pay dividends or make certain
other restricted payment, sell assets, make certain investments and grant liens, which may make it more difficult for us to obtain
additional capital and to pursue business opportunities. We may also be required to take other actions that would otherwise be
in the interests of the debt holders and force us to maintain specified liquidity or other ratios, including limitations to our total
leverage ratio, any of which could harm our business, results of operations, and financial condition. If we need additional
capital and cannot raise it on acceptable terms, we may not be able to, among other things:
•
•
•
•
develop or enhance our products and platforms,
acquire complementary technologies, products or businesses,
expand operations in the United States or internationally, or
respond to competitive pressures or unanticipated working capital requirements.
If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to
continue to support our business growth and to respond to business challenges could be significantly limited which may also
require us to delay, scale back or eliminate some or all of our activities, which could have a material adverse effect on our
business, results of operations and financial condition.
Our revenue, earnings and profitability are affected by the length of our sales cycle, and a longer sales cycle could adversely
affect our results of operations and financial condition.
Our business is directly affected by the length of our sales cycles. Our customers’ businesses are relatively complex and
their purchase of the types of products and services that we offer generally involve a significant financial commitment, with
12
attendant delays, frequently associated with large financial commitments and procurement procedures within a large
organization. In addition, as we continue to further expand our presence in the global market, and the size and complexity of
our sales opportunities continue to vary, we have seen an increase in the average length of time in our sales cycles. The
purchase of the types of products and services that we offer typically requires coordination and agreement across many
departments within a potential customer’s organization. Delays associated with such timing factors could have a material
adverse effect on our results of operations and financial condition. In periods of economic slowdown our typical sales cycle
lengthens, which means that the average time between our initial contact with a prospective customer and the signing of a sales
contract increases. The lengthening of our sales cycle could reduce growth in our revenue. In addition, the lengthening of our
sales cycle contributes to an increased cost of sales, thereby reducing our profitability.
We may experience quarterly fluctuations in our operating results due to a number of factors which make our future results
difficult to predict and could cause our operating results to fall below expectations or our guidance.
As a result of a variety of factors discussed in this report, many of which are out of our control, our operating results for a
particular quarter is difficult to predict, especially in light of a challenging and inconsistent global macroeconomic environment
and related market uncertainty. Our revenue may grow at a slower rate than in past periods or decline, as it has in the past, on a
year-over-year basis. Our ability to meet financial expectations could also be adversely affected if the nonlinear sales pattern
seen in some of our past quarters recurs in future periods. The timing of large engagements can also have a significant effect on
our business and operating results from quarter to quarter. The timing of such engagements is difficult to predict, and the timing
of revenue recognition from such engagements may affect period to period changes in revenue. As a result, our operating
results could vary materially from quarter to quarter based on such engagements and their ultimate recognition as revenue. We
plan our operating expense levels based primarily on forecasted revenue levels. These expenses and the impact of long-term
commitments are relatively fixed in the short term. A shortfall in revenue could lead to operating results being below
expectations because we may not be able to quickly reduce these fixed expenses in response to short-term business changes. As
a result, comparing our operating results on a period-to-period basis may not be meaningful. Our past results should not be
relied on as an indication of our future performance. Non-GAAP financial measures should not be considered in isolation from,
or as a substitute for, financial information prepared in accordance with GAAP. In addition, non-GAAP metrics we may
disclose, such as Adjusted EBITDA, Invoiced Revenue, and any corresponding trends in such metrics should not be relied on as
an indication that our GAAP results, such as net income (loss), will be similar or will follow the same trends. If our revenue or
operating results fall below the expectations of investors or securities analysts or below any guidance we may provide to the
market, the price of our common stock could decline substantially. Any of the above factors could have a material adverse
impact on our operations and financial results.
We are subject to revenue recognition standards and because we recognize revenue for certain products and services ratably
over the term of customer agreements upturns or downturns in the value of signed contracts will not be fully and
immediately reflected in our operating results and any changes in the standards could impact our business.
We offer certain of our products and services primarily through fixed or variable commitment contracts and recognize
revenue ratably over the related service period, which typically ranges from twelve to twenty-four months. As a result, some
portion of the revenue we report in each quarter is revenue from contracts entered into during prior periods. Consequently, a
decline in signed contracts in any quarter will not be fully and immediately reflected in revenue for that quarter but may instead
negatively affect our revenue in future quarters. In addition, we may be unable to adjust our cost structure to offset this reduced
revenue. Similarly, revenue attributable to an increase in contracts signed in a particular quarter will not be fully and
immediately recognized, as revenue from new or renewed contracts is recognized ratably over the applicable service period.
Because we incur certain sales costs at the time of sale, we may not recognize revenues from some customers despite incurring
considerable expense related to our sales processes. Timing differences of this nature could cause our margins and profitability
to fluctuate significantly from quarter to quarter. As we introduce new services or products, revenue recognition could become
increasingly complex and require additional analysis and judgment. Additionally, for new contracts with existing customers, we
may negotiate and revise previously used terms and conditions of our contracts with these customers and channel partners,
which may also cause us to revise our revenue recognition policies. As our arrangements with customers change, we may be
required to defer a greater portion of revenue into future periods, which could materially and adversely affect our financial
results.
If we do not meet our revenue forecasts, we may be unable to reduce our expenses in a timely fashion to avoid or minimize
harm to our results of operations.
Our revenues are difficult to forecast and are likely to fluctuate significantly from period to period, particularly as we
continue to implement our business strategy. We base our operating expense and capital investment budgets on expected sales
and revenue trends, and many of our expenses, such as office and equipment leases and personnel costs, will be relatively fixed
13
in the short term and will increase over time as we make investments in our business. Our estimates of sales trends may not
correlate with actual revenues in a particular quarter or over a longer period of time. Variations in the rate and timing of
conversion of our sales prospects into sales and actual revenues could cause us to plan or budget inaccurately and those
variations could adversely affect our financial results. In particular, delays, reductions in amount or cancellation of customers’
contracts would adversely affect the overall level and timing of our revenues, and our business, results of operations and
financial condition could be harmed. Due to the relatively fixed nature of many of our expenses, we may be unable to adjust
spending quickly enough to offset any unexpected revenue shortfall. In the course of our sales to customers, we may encounter
difficulty collecting accounts receivable and could be exposed to risks associated with uncollectible accounts receivable. In the
event we are unable to collect on our accounts receivable, it could negatively affect our cash flows, operating results and
business.
Economic, political and market conditions can adversely affect our results of operations, financial condition and business.
Our business is influenced by a range of factors that are beyond our control and that we have no comparative advantage in
forecasting. These include but are not limited to general economic and business conditions, the overall demand for cloud-based
products and services, general political developments and currency exchange rate fluctuations. Economic uncertainty, including
interest rate increases and inflation, may exacerbate negative trends in consumer spending and may negatively impact the
businesses of certain of our customers, which may cause a reduction in their use of our platforms or increase the likelihood of
defaulting on their payment obligations, and therefore cause a reduction in our revenues. These conditions and uncertainty
about future economic conditions may make it challenging for us to forecast our operating results, make business decisions and
identify the risks that may affect our business, financial conditions and results of operations and may result in a more
competitive environment, resulting in possible pricing pressures. Our business could be affected by acts of war or other military
actions, terrorism, natural disasters and the widespread outbreak of infectious diseases. Current world tensions could escalate,
and this could have unpredictable consequences on the world economy and on our business.
There is significant uncertainty in the global economy. Continued uncertainty about the associated economic consequences
may have a long-term adverse effect on the economy, our sellers, customers, suppliers, and our business. For example, we are
currently subletting some of our office space. An economic downturn or our work from home practices may cause us to need
less office space than we are contractually committed to leasing and prevent us from finding subtenants for such unused office
space, causing us to pay for unused office space. Similarly, an economic downturn or changes to the market could affect our
subtenants and may cause them to default on their subleases, resulting in the Company being responsible for lease payments for
the subleased spaces. Rising tensions in the geopolitical climate, including effects of the ongoing conflict between Russia and
Ukraine, and the conflict between Israel and Hamas and other militant groups in the Middle East and the possibility of a wider
regional or global conflict, and global sanctions imposed in response thereto, have created significant uncertainty in the global
economy. These or any further political or governmental developments or health concerns in countries could result in social,
economic and labor instability. If, as a result of such events, we experience a reduction in demand for our products, platforms or
services, or the supply of products or components to our customers, our business, results of operations and financial condition
may be materially and adversely affected.
We traditionally have had substantial customer concentration, with a limited number of customers accounting for a
substantial portion of our revenues.
The Company’s top five customers accounted for 96.6%, 94.6% and 92.4% of net revenues for the years ended December
31, 2023, 2022 and 2021, respectively. Contracts with these customers typically run for three to five years. Of these customers,
Verizon accounted for more than 10% of the Company’s revenues in 2023, 2022, and 2021; and AT&T accounted for more
than 10% of the Company’s revenues in 2023. There are inherent risks whenever a large percentage of total revenues are
concentrated with a limited number of customers. It is not possible for us to predict the future level of demand for our products
and services that will be generated by these customers or the future demand for the products and services of these customers in
the end-user marketplace. In addition, revenues from these larger customers may fluctuate from time to time based on the
commencement and completion of projects, the timing of which may be affected by market conditions or other factors, some of
which may be outside of our control. Further, some of our contracts with these larger customers permit them to terminate our
services at any time (subject to notice and certain other provisions). If any of our major customers experience declining or
delayed sales due to market, economic or competitive conditions, we could be pressured to reduce the prices we charge for our
services or we could lose the customer. Any such development could have an adverse effect on our margins and financial
position and would negatively affect our revenues and results of operations and/or trading price of our common stock.
We may be able to incur substantially more debt, which could have important consequences to investors.
We may be able to incur substantial additional indebtedness in the future. The terms of the indenture governing the Senior
Notes does not prohibit us from doing so. If we incur any additional indebtedness that ranks equally with the Senior Notes, the
14
holders of that debt will be entitled to share ratably with holders of the Senior Notes in any proceeds distributed in connection
with any insolvency, liquidation, reorganization or dissolution. This may have the effect of reducing the amount of proceeds
paid to investors. Incurrence of additional debt would also further reduce the cash available to invest in operations, as a result of
increased debt service obligations. If new debt is added to our current debt levels, the related risks that we now face could
intensify.
Our level of indebtedness could have important consequences to investors, because:
•
•
•
•
•
•
it could affect our ability to satisfy our financial obligations, including those relating to the Senior Notes;
a substantial portion of our cash flows from operations would have to be dedicated to interest and principal payments
and may not be available for operations, capital expenditures, expansion, acquisitions or general corporate or other
purposes;
it may impair our ability to obtain additional debt or equity financing in the future;
it may limit our ability to refinance all or a portion of our indebtedness on or before maturity;
it may limit our flexibility in planning for, or reacting to, changes in our business and industry; and
it may make us more vulnerable to downturns in our business, our industry or the economy in general.
Our operations may not generate sufficient cash to enable us to service our debt. If we fail to make a payment on the Senior
Notes, we could be in default on the Senior Notes, and this default could cause us to be in default on other indebtedness, to the
extent outstanding. Conversely, a default under any other indebtedness, if not waived, could result in acceleration of the debt
outstanding under the related agreement and entitle the holders thereof to bring suit for the enforcement thereof or exercise
other remedies provided thereunder. In addition, such default or acceleration may result in an event of default and acceleration
of other indebtedness of the Company, entitling the holders thereof to bring suit for the enforcement thereof or exercise other
remedies provided thereunder. If a judgment is obtained by any such holders, such holders could seek to collect on such
judgment from the assets of the Company. If that should occur, we may not be able to pay all such debt or to borrow sufficient
funds to refinance it. Even if new financing were then available, it may not be on terms that are acceptable to us.
However, no event of default under the Senior Notes would result from a default or acceleration of, or suit, other exercise
of remedies or collection proceeding by holders of, our other outstanding debt, if any. As a result, all or substantially all of our
assets may be used to satisfy claims of holders of our other outstanding debt, if any, without the holders of the Senior Notes
having any rights to such assets.
We may make investments in new products and services that may not be profitable.
We intend to continue to make investments to support our business growth, including expenditures to develop new services
or enhance our existing services, enhance our operating infrastructure, market and sell our product offerings and acquire
complementary businesses and technologies. These endeavors may involve significant risks and uncertainties and could lead to
a misapplication of our resources. These new investments are inherently risky and may involve distracting management from
current operations, create greater than expected liabilities and expenses, provide us with an inadequate return on capital, include
other unidentified risks and, ultimately, may generally not be successful. Further, our ability to effectively integrate new
services and investments into our business may affect our profitability. Significant delays in new releases or significant
problems in creating new products or services could adversely affect our revenue and financial performance.
We must recruit and retain our key management and other key personnel and our failure to recruit and retain qualified
employees could have a negative impact on our business.
We believe that our success depends in part on the continued contributions of our senior management and other key
personnel to generate business and execute programs successfully. In addition, the relationships and reputation that these
individuals have established and maintain with our customers and within the industries in which we operate contribute to our
ability to maintain good relations with our customers and others within those industries. The loss of any members of senior
management or other key personnel could materially impair our ability to identify and secure new contracts and otherwise
effectively manage our business. In order to attract and retain executives and other key employees in a competitive marketplace,
we must provide a competitive compensation package, including cash- and equity-based compensation. If we do not obtain the
stockholder approval needed to continue granting equity compensation in a competitive manner, our ability to attract, retain,
and motivate executives and key employees could be weakened. Further, in the technology industry, there is substantial and
continuous competition for highly skilled business, product development, technical and other personnel. We may be unable to
attract or retain qualified personnel because their salaries and other compensation may increase to levels that we are unwilling
or unable to provide. Competition for qualified personnel at times can be intense and as a result we may not be successful in
attracting and retaining the personnel we require, which could have a material adverse effect on our ability to meet our
commitments and new product delivery objectives. If we are unable to maintain or expand our direct sales capabilities, we may
15
not be able to generate anticipated revenues. In addition, if we are unable to maintain or expand our product development
capabilities, we may not be able to meet our product development goals. Further, we rely on the expertise and experience of our
senior management team. Although we have employment agreements with our executive officers, none of them or any of our
other management personnel is obligated to remain employed by us. The loss of services of any key management personnel
could lower productive output, interrupt our strategic vision and make it more difficult to pursue our business goals
successfully.
Our performance and growth depend on our ability to generate customer referrals and to develop referenceable customer
relationships that will enhance our sales and marketing efforts. A failure to accomplish these objectives could materially
harm our business.
In our business, we depend on end-users of our solutions to generate customer referrals for our services. We also depend on
members of the communications industry, financial institutions, legal service providers and other third parties who use our
services to recommend them to a larger customer base than we can reach through our direct sales and internal marketing efforts.
These referrals are an important source of new customers for our services and generally are made without expectation of
compensation. We intend to continue to focus our marketing efforts on these referral partners in order to expand our reach and
improve the efficiency of our sales efforts. We also recognize that having respected, well known, market-leading customers
who have committed to deploy our solutions within their organizations will support our marketing and sales efforts, as these
customers can act as references for us and our product offerings. Our ability to establish and maintain these customer
relationships is important to our future profitability. The willingness of these types of customers to provide referrals or serve as
anchor or reference customers depends on a number of factors, including the performance, ease of use, reliability, reputation
and cost-effectiveness of our services as compared to those offered by our competitors, as well as the internal policies of these
customers. We may not be able to cultivate or maintain the relationships with customers that are necessary to develop those
customer relationships into referenceable accounts.
The loss of any of our significant referral sources, including our anchor customers, or a decline in the number of referrals
we receive or anchor customers that we generate could require us to devote substantially more resources to the sales and
marketing of our services, which would increase our costs, potentially lead to a decline in our revenue, slow our growth and
generally have a material adverse effect on our business, results of operations and financial condition. In addition, the revenue
we generate from our referral and anchor relationships may vary from period to period.
Many of our current and planned products are highly complex and may contain defects or errors that are detected only after
deployment in telecommunications networks. If that occurs, our reputation or market acceptance of our products and
services may be harmed.
Our products are highly complex, and we cannot assure customers that our extensive product development, production and
integration testing is, or will be, adequate to detect all defects, errors, failures and quality issues that could affect customer
satisfaction or result in claims against us. Our products and services may contain undetected errors or scalability limitations at
any point in their lives, but particularly when first introduced or as new versions are released. As a result, we might have to
replace certain components and/or provide remediation in response to the discovery of defects in products that have been
supplied to customers. The occurrence of any defects, errors, failures or quality issues could result in cancellation of orders,
product returns, diversion of our resources, legal actions by customers or customers’ end users and other losses to us or to our
customers or end users. These occurrences could also result in the loss of or delay in market acceptance of our products, in the
loss of sales, or in the need to create provisions, which would harm our business and adversely affect our revenues and
profitability.
Failure to maintain the confidentiality, integrity and availability of our systems, software and solutions could seriously
damage our reputation and affect our ability to retain customers and attract new business.
Maintaining the confidentiality, integrity and availability of our systems, software and solutions is an issue of critical
importance for us and for our customers and users who rely on our systems to store and exchange large volumes of information,
much of which is proprietary and confidential. There appears to be an increasing number of individuals, governments, groups
and computer “hackers” developing and deploying a variety of destructive software programs (such as viruses, worms and other
malicious software) that could attack our computer systems or solutions or attempt to infiltrate our systems. We make
significant efforts to maintain the confidentiality, integrity and availability of our systems, solutions and source code. Despite
significant efforts to create security barriers, it is virtually impossible for us to mitigate this risk entirely because techniques
used to obtain unauthorized access or sabotage systems change frequently and generally are not recognized until launched
against a target. Like all software solutions, our software is vulnerable to these types of attacks. An attack of this type could
disrupt the proper functioning of our software solutions, cause errors in the output of our customers’ work, allow unauthorized
16
access to sensitive, proprietary or confidential information of ours or our customers, and other destructive outcomes. If an
actual or perceived breach of our security were to occur, our reputation could suffer, customers could stop buying our solutions
and we could face lawsuits and potential liability, any of which could cause our financial performance to be negatively
impacted. Though we maintain professional liability insurance that may be available to provide coverage if a cybersecurity
incident were to occur, there can be no assurance that insurance coverage will be available or that available coverage will be
sufficient to cover losses and claims related to any cybersecurity incidents we may experience.
There is also a danger of industrial espionage, cyber-attacks, misuse or theft of information or assets (including source
code), or damage to assets by people who have gained unauthorized access to our facilities, systems or information, which
could lead to the disclosure of portions of our source code or other confidential information, improper usage and distribution of
our solutions without compensation, illegal or inappropriate usage of our systems and solutions, jeopardizing of the security of
information stored in and transmitted through our computer systems, manipulation and destruction of data, defects in our
software and downtime issues. The risk of security incidents is increasing as we experience an increase in electronic payments,
e-commerce, and other online activity. Additionally, due to political uncertainty and military actions associated with Russia’s
invasion of Ukraine, we and our service providers are vulnerable to heightened risks of security incidents and security and
privacy breaches from or affiliated with nation-state actors, including attacks that could materially disrupt our systems,
operations, supply chain, products, and services. While we do not currently have operations in areas experiencing rising
political conflict and uncertainty, there is an increased likelihood that escalation of tensions could result in cyber-attacks or
cybersecurity incidents that could either directly or indirectly impact our operations. As such, the risk of cybersecurity incidents
is increasing, and we cannot provide assurances that our preventative efforts will be successful. Although we actively employ
measures to combat unlicensed copying, access and use of our facilities, systems, software and intellectual property through a
variety of techniques, preventing unauthorized use or infringement of our rights is inherently difficult. The occurrence of an
event of this nature could adversely affect our financial results or could result in significant claims against us for damages.
Further, participating in either a lawsuit to protect against unauthorized access to, usage of or disclosure of any of our solutions
or any portion of our source code or the prosecution of an individual in connection with a cybersecurity breach could be costly
and time-consuming and could divert management’s attention and adversely affect the market’s perception of us and our
solutions. A number of core processes, such as software development, sales and marketing, customer service and financial
transactions, rely on our IT, infrastructure and applications. Defects or malfunctions in our IT infrastructure and applications
could cause our service offerings not to perform as our customers expect, which could harm our reputation and business. In
addition, malicious software, sabotage and other cybersecurity breaches of the types described above could cause an outage of
our infrastructure, which could lead to a substantial denial of service and ultimately downtimes, recovery costs and customer
claims, any of which could have a significant negative impact on our business, financial position, profitability and cash flows.
The confidentiality, integrity and availability of our systems could also be jeopardized by a breach of our internal controls
and policies by our employees, consultants or subcontractors having access to our systems. If our systems fail or are breached
as a result of a third-party attack or an error, violation of internal controls or policies or a breach of contract by an employee,
consultant or subcontractor that results in the unauthorized use or disclosure of proprietary or confidential information or
customer data (including information about the existence and nature of the projects and transactions our customers are engaged
in), we could lose business, suffer irreparable damage to our reputation and incur significant costs and expenses relating to the
investigation and possible litigation of claims relating to such event. We could be liable for damages, penalties for violation of
applicable laws or regulations and costs for remediation and efforts to prevent future occurrences, any of which liabilities could
be significant. There can be no assurance that the limitations of liability in our contracts would be enforceable or adequate or
would otherwise protect us from liabilities or damages with respect to any particular claim. Furthermore, litigation, regardless
of its outcome, could result in a substantial cost to us and divert management’s attention from our operations. Any significant
claim against us or litigation involving us could have a material adverse effect on our business, financial condition and results
of operations.
We have implemented a number of security measures designed to ensure the security of our information, IT resources and
other assets. Nonetheless, unauthorized users could gain access to our systems through cyber-attacks and steal, use without
authorization and sabotage our intellectual property and confidential data. Any security breach, misuse of our IT systems or
theft of our or our customers’ intellectual property or data could lead to customer losses, non-renewal of customer agreements,
loss of production, recovery costs or litigation brought by customers or business partners, any of which could adversely impact
our cash flows and reputation and could have an adverse impact on our disclosure controls and procedures.
Despite our efforts to protect our intellectual property, unauthorized third parties may attempt to copy our technology or to
develop products or solutions with the same or similar functions, which infringe upon our rights. Pursuing these potential
violations of Synchronoss’ intellectual property rights is difficult and costly. Our competition may also independently develop
technology equivalent to ours and our intellectual property rights may not be sufficient to prevent them from marketing and
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selling those products which incorporate such technology, which could have a material adverse effect on our ability to compete
in the marketplace.
Failures or interruptions of our systems and services could materially harm our revenues, impair our ability to conduct our
operations and damage relationships with our customers.
Our success depends on our ability to provide reliable services to our customers and process a high volume of transactions
in a timely and effective manner. Although we operate disaster recovery solutions and maintain backup systems, our network
operations are susceptible to damage or interruption from human error, fire, flood, power loss, telecommunications failure,
terrorist attacks, war or other military conflict, including escalation of ongoing political conflicts and similar events. A
catastrophic event that results in the destruction or disruption of any of our data centers or our critical business or information
technology systems could severely affect our ability to conduct normal business operations and, as a result, our business,
operating results and financial condition could be adversely affected. We could also experience failures or interruptions of our
systems and services, or other problems in connection with our operations, as a result of, among other things:
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damage to, or failure of, our computer software or hardware or our connections and outsourced service arrangements
with third parties;
errors in the processing of data by our systems;
computer viruses or software defects;
physical or electronic break-ins, sabotage, intentional acts of vandalism and similar events;
fire, cybersecurity attack, terrorist attack or other catastrophic event;
increased capacity demands or changes in systems requirements of our customers; or
errors by our employees or third-party service providers.
We rely on various systems and applications to support our internal operations, including our billing, financial reporting
and customer contracting functions. The availability of these systems and applications is essential to us and delays, disruptions
or performance problems may adversely impact our ability to accurately bill our customers, report financial information and
conduct our business, or cause us to suffer reputational harm, delays in product development, lack of products provided to our
customers, breaches of data security and loss of critical data. Any failure or interruption of our systems and services could also
prevent us from fulfilling customer orders or maintaining certain service level requirements, particularly in respect of our
software as a service (“SaaS”) and hosted offerings.
Additionally, we may choose to replace or implement changes to these systems, including substituting traditional systems
with cloud-based solutions, which could be time-consuming and expensive, and which could result in delays in the ongoing
operational processes these software solutions support. Further, our cloud-based solutions may experience disruptions and
outages that are beyond our control as we rely on third-party vendors to support these solutions and assure their continued
availability. We have also acquired a number of companies, products, services and technologies over the last several years.
While we make significant efforts to address any IT security issues with respect to our acquisitions, we may still inherit certain
risks when we integrate these acquisitions. In addition, our business interruption insurance may be insufficient to compensate us
for losses or liabilities that may occur. Any interruptions in our systems or services could damage our reputation and
substantially harm our business and results of operations.
The quality of our support and services offerings is important to our customers and if we fail to meet our service level
obligations under our service level agreements or otherwise fail to offer quality support and services, we would be subject to
penalties and could lose customers.
Our customers generally depend on our service organization to resolve issues relating to the use of our solutions. A high
level of support is critical for the successful marketing and sale of our solutions. If we are unable to provide a level of support
and service to meet or exceed the expectations of our customers, we could experience:
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loss of customers and market share;
difficulty attracting or the inability to attract new customers, including in new geographic regions; and
increased service and support costs, and a diversion of resources.
Any of the above results would likely have a material adverse impact on our business, revenue, results of operations,
financial condition and reputation. In addition, we have service level agreements with many of our customers under which we
guarantee specified levels of service availability. These arrangements involve the risk that we may not have adequately
estimated the level of service we will in fact be able to provide. The importance of high-quality customer support will increase
as we expand our business and pursue new enterprise customers. If we fail to meet our service level obligations under these
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agreements, we would be subject to penalties, which could result in higher than expected costs, decreased revenues and
decreased operating margins. We could also lose customers.
Our reliance on third-party providers for communications software, services, hardware and infrastructure exposes us to a
variety of risks we cannot control.
Our success depends on software, equipment, network connectivity and infrastructure hosting services supplied by, or
leased from, our vendors and customers. In addition, we rely on third-party vendors to perform a substantial portion of our
exception handling services. We may not be able to continue to purchase the necessary software, equipment and services from
vendors on acceptable terms or at all. If we are unable to maintain current purchasing terms or ensure service availability with
these vendors and customers, we may lose customers and experience an increase in costs in seeking alternative supplier
services. Further, any changes in our third-party vendors could detract from management’s ability to focus on the ongoing
operations of our business or could cause delays in the operations of our business. Our business also depends upon the capacity,
reliability and security of the infrastructure owned and managed by third parties, including our vendors and customers that are
used by our technology interoperability services, network services, number portability services, call processed services and
enterprise solutions. We have no control over the operation, quality or maintenance of a significant portion of that infrastructure
and whether those third parties will upgrade or improve their software, equipment and services to meet our and our customers’
evolving requirements. We depend on these companies to maintain the operational integrity of our services. If one or more of
these companies is unable or unwilling to supply or expand its levels of services to us in the future, our operations could be
severely interrupted. In addition, rapid changes in the communications industry have led to industry consolidation. This
consolidation may cause the availability, pricing and quality of the services we use to vary and could lengthen the amount of
time it takes to deliver the services that we use.
Any damage to, or failure or capacity limitations of, our systems and our related network could result in interruptions in
our service that could cause us to lose revenue, issue credits or refunds or could cause our customers to terminate their
subscriptions for our services, in each case adversely affecting our renewal rates. Since our customers use our service for
important aspects of their businesses, any errors, defects, disruptions in service or other performance problems could hurt our
reputation and may damage our customers’ businesses. As a result, we may lose revenue, issue credits or refunds, or customers
could elect not to renew our services or delay or withhold payments to us. We could also lose future sales or customers may
make claims against us, which could result in an increase in our provision for credit losses, an increase in collection cycles for
accounts receivable or the expense or risk of litigation. Additionally, third-party software underlying our services can contain
undetected errors or bugs. We may be forced to delay commercial release of our services until any discovered problems are
corrected and, in some cases, may need to implement enhancements or modifications to correct errors that we do not detect
until after deployment of our services. In addition, problems with the third-party software underlying our services could result
in:
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damage to our reputation;
loss of or customers or delayed revenue;
warranty claims or litigation;
loss of or delayed market acceptance of our services, or
unexpected expenses and diversion of resources to remedy errors.
Interruptions or delays in our service due to problems with our third-party web hosting facilities or other third-party service
providers could adversely affect our business.
We rely on third parties for the maintenance of certain of the equipment running our solutions and software at
geographically dispersed hosting facilities with third parties. If we are unable to renew, extend or replace our agreements with
any of our third-party hosting facilities, we may be unable to arrange for replacement services at a similar cost and in a timely
manner, which could cause an interruption in our service. We do not control the operation of these third-party facilities, each of
which may be subject to damage or interruption from earthquakes, floods, fires, power loss, telecommunications failures or
similar events. These facilities may also be subject to break-ins, sabotage, intentional acts of vandalism or similar misconduct.
Despite precautions taken at these facilities, the occurrence of a natural disaster, cessation of operations by our third-party web
hosting provider or a third party’s decision to close a facility without adequate notice or other unanticipated problems at any
facility could result in lengthy interruptions in our service. In addition, the failure by these facilities to provide our required data
communications capacity could result in interruptions in our service.
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We may seek to acquire companies or technologies, form joint ventures or make investments in other companies or
technologies, which could disrupt our ongoing business, disrupt our management and employees, dilute our stockholders’
ownership, increase our debt, and adversely affect our results of operations.
We have made, and in the future intend to form joint ventures, make acquisitions of and investments in companies,
technologies or products in existing, related or new markets for us that we believe may enhance our market position or strategic
strengths. However, we cannot be sure that any acquisition or investment will ultimately enhance our products or strengthen our
competitive position. Acquisitions involve numerous risks, including but not limited to:
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diversion of management’s attention from other operational matters;
inability to identify acquisition candidates on terms acceptable to us or at all, or inability to complete acquisitions as
anticipated or at all;
inability to realize anticipated benefits or commercialize purchased technologies;
exposure to operational risks, rules and regulations to the extent such activities are located in countries where we have
not historically done business;
unknown, underestimated and/or undisclosed commitments or liabilities;
incurrence of debt, contingent liabilities or future write-offs of intangible assets or goodwill;
dilution of ownership of our current stockholders if we issue shares of our common stock;
higher than expected transaction costs; and
ineffective integration of operations, technologies, products or employees of the acquired companies.
In addition, acquisitions may disrupt our ongoing operations, increase our expenses and/or harm our results of operations or
financial condition. Future acquisitions could also result in potentially dilutive issuances of equity securities, the incurrence of
debt (which may reduce our cash available for operations and other uses), an increase in contingent liabilities or an increase in
amortization expense related to identifiable assets acquired, each of which could materially harm our business, financial
condition and results of operations.
We are exposed to our customers’ credit risk.
We are subject to the credit risk of our customers, and customers with liquidity issues may lead to credit losses for us. Most
of our sales are on an open credit basis, with typical payment terms 90 days in the United States and, because of local customs
or conditions, longer payment terms in some markets outside the United States. We use various methods to screen potential
customers and establish appropriate credit limits, but these methods cannot eliminate all potential bad credit risks and may not
prevent us from approving applications that are fraudulently completed. Moreover, businesses that are good credit risks at the
time of application may become bad credit risks over time and we may fail to detect this change. We maintain reserves we
believe are adequate to cover exposure for credit losses. If we fail to adequately assess and monitor our credit risks, we could
experience longer payment cycles, increased collection costs and higher bad debt expense. A decrease in accounts receivable
resulting from an increase in bad debt expense could adversely affect our liquidity. Our exposure to credit risks may increase if
our customers are adversely affected by a difficult macroeconomic environment, or if there is a continuation or worsening of
the economic environment. Although we have programs in place that are designed to monitor and mitigate the associated risk,
including monitoring of particular risks in certain geographic areas, there can be no assurance that these programs will be
effective in reducing our credit risks or preventing us from incurring additional losses. Future losses, if incurred, could harm our
business and have a material adverse effect on our business operating results and financial condition. Additionally, to the degree
that the current or future credit markets make it more difficult for some customers to obtain financing, those customers’ ability
to pay could be adversely impacted, which in turn could have a material adverse impact on our business, operating results, and
financial condition.
We are subject to credit risk and other risks associated with our accounts receivable securitization facility (the “A/R
Facility”).
We entered into the A/R Facility with Norddeutsche Landesbank Girozentrale (“NLG”) in June 2022 that permits
borrowings of up to $15.0 million outstanding from time to time through June 2025 against our existing and future account
receivables. As of December 31, 2023, there were no outstanding obligations under the A/R Facility.
The amounts available under the A/R Facility depend on the size of our accounts receivable. If these amounts are less than
we forecast, this could negatively affect our expected borrowing capacity and our ability to satisfy any obligations as they
become due.
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The willingness of NLG to make advances to us is subject to customary conditions for financings of this nature. If we are
unable to satisfy those conditions, NLG could refrain from providing financing to us, and we may experience a material and
adverse loss of liquidity. The A/R Facility contains representations and warranties, affirmative and negative covenants, and
events of default that are customary for financings of this type. If we breach certain of our debt covenants under the A/R
Facility, we will be unable to utilize the full borrowing capacity under the A/R Facility and our lenders could require us to repay
the debt immediately and could immediately take possession of the receivables securing such debt. In addition, because our
Senior Notes and A/R Facility contain cross-default and cross-acceleration provisions with other debt, if any debtholder were to
declare its loan due and payable as a result of a default, the holders of the Senior Notes or NLG, might be able to require us to
pay those debts immediately.
If NLG terminates the A/R Facility, we may experience a material and adverse loss of our liquidity, which could have a
material adverse effect on financial, results of operations and cash flows.
Due to the global nature of our operations, political or economic changes or other factors in a specific country or region
could harm our operating results and financial condition.
We conduct significant sales and customer support operations in countries around the world. As such, our growth depends
in part on our increasing sales into emerging countries. We also depend on, and many of our customers depend on, non-U.S.
operations of our contract manufacturers, component suppliers and distribution partners. We continue to assess the
sustainability of any improvements in these countries and there can be no assurance that our investments in these countries will
be successful. Our future results could be materially adversely affected by a variety of political, economic or other factors
relating to our operations inside and outside the United States, including impacts from global central bank monetary policy;
issues related to the political relationship between the United States and other countries that can affect the willingness of
customers in those countries to purchase products from companies headquartered in the United States; business interruptions
resulting from regional or larger scale conflicts or geo-political actions; the impact of the COVID-19 or other public health
epidemics or concerns on our customer’s component suppliers, and the challenging and inconsistent global macroeconomic
environment, any or all of which could have a material adverse effect on our operating results and financial condition,
including, among others things:
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current or future supply chain interruptions;
foreign currency exchange rates;
political or social unrest or instability;
economic instability or weakness, including inflation, or natural disasters in a specific country or region;
environmental and trade protection measures and other legal and regulatory requirements, some of which may affect
our ability to import our products, to export our products from, or sell our products in various countries;
political considerations that affect service provider and government spending patterns;
health or similar issues and the responses thereto, such as a pandemic or epidemic, including the COVID-19 pandemic
and responses taken thereto;
natural disasters, terrorism, war or other military conflict, including effects of the ongoing conflict between Russia and
Ukraine, the conflict between Israel and Hamas and other militant groups in the Middle East and the possibility of a
wider regional or global conflict, and global sanctions imposed in response thereto, telecommunication and electrical
failures;
difficulties in staffing and managing international operations; or
adverse tax consequences, including imposition of withholding or other taxes on our global operations.
Concerns over economic recession, the COVID-19 pandemic, interest rate increases and inflation, supply chain delays and
disruptions, policy priorities of the U.S. presidential administration, trade wars, unemployment, or prolonged government
shutdown may contribute to increased volatility and diminished expectations for the economy and markets. Additionally,
concern over geopolitical issues may also contribute to prolonged market volatility and instability. For example, the conflict
between Russia and Ukraine or the conflict between Israel and Hamas and other militant groups in the Middle East could
continue to lead to disruption, instability and volatility in global markets and industries. The U.S. government and governments
in other jurisdictions have imposed severe economic sanctions and export controls against Russia and Russian interests, have
removed Russia from the Society for Worldwide Interbank Financial Telecommunication system, and have threatened
additional sanctions and controls. The impact of these measures, as well as potential responses to them by Russia, is unknown.
Fluctuations in foreign currency exchange rates could result in foreign currency transaction losses, which could harm our
operating results and financial condition.
We consider the U.S. dollar to be our functional currency. However, given our international operations we currently have,
and expect to have in the future, revenue and expenses and related assets and liabilities denominated in foreign currencies.
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Foreign currency transaction exposure results primarily from transactions with customers or vendors denominated in currencies
other than the functional currency of the entity in which we record the transaction. Any fluctuation in the exchange rate of these
foreign currencies may positively or negatively affect our business and operating results. We face exposure to movements in
foreign currency exchange rates due to the fact that we have non-U.S. dollar denominated revenue worldwide. Furthermore,
volatile market conditions arising from impacts from the conflict in Ukraine, the conflict between Israel and Hamas and other
militant groups in the Middle East, and other macroeconomic conditions may result in significant fluctuations in exchange rates.
Weakening of foreign currencies relative to the U.S. dollar adversely affects the U.S. dollar value of our foreign currency
denominated revenue and positively affects the U.S. dollar value of our foreign currency denominated expenses. If foreign
currencies were to weaken or strengthen relative to the U.S. dollar, we might elect to raise or lower our international pricing,
which could potentially impact demand for our services. Alternatively, we might opt not to adjust our international pricing as a
result of fluctuations in foreign currency exchange rates, which could potentially have a positive or negative impact on our
results of operations and financial condition. Similarly, our financial performance may be impacted by fluctuations in currency
exchange rates when it comes to our non-U.S. dollar denominated expenses. The third-party vendors and suppliers to whom we
owe payments for non-U.S. dollar denominated expenses may or may not decide to adjust their pricing to reflect fluctuations in
foreign currency exchange rates. If there continues to be volatility in foreign currency exchange rates, we will continue to
experience fluctuations in our operating results due to revaluing our assets and liabilities that are not denominated in the
functional currency of the entity that recorded the asset or liability, and the translation of our non-U.S. denominated revenue
and expenses into U.S. dollars may affect the year-over-year comparability of our operating results.
Downgrades in our credit ratings may increase our future borrowing costs, limit our ability to raise capital, cause our stock
price to decline or reduce analyst coverage, any of which could have a material adverse impact on our business.
Credit rating agencies review their ratings periodically and, therefore, the credit rating assigned to us by each of the rating
agencies may be subject to revision at any time. Factors that can affect our credit ratings include changes in our operating
performance, the economic environment, our financial position, conditions in and periods of disruption in any of our principal
markets and changes in our business strategy. If weak financial market conditions or competitive dynamics cause any of these
factors to deteriorate, we could see a reduction in our corporate credit rating. Since investors, analysts and financial institutions
often rely on credit ratings to assess a company’s creditworthiness and risk profile, make investment decisions and establish
threshold requirements for investment guidelines, our ability to raise capital, our access to external financing, our stock price
and analyst coverage of our stock could be negatively impacted by a downgrade to our credit rating.
Our insurance policies, including general liability, errors and omissions, directors’ and officers’ insurance and cyber
insurance may not totally protect us.
We cannot assure that our existing general liability insurance coverage, coverage for errors and omissions, directors’ and
officers’ insurance and cyber liability insurance will continue to be available on acceptable terms in sufficient amounts to cover
one or more large claims, or that the insurer will not deny coverage as to any future claim. The successful assertion of one or
more large claims against us that exceeds our available insurance coverage, or the occurrence of changes in our insurance
policies, including premium increases or the imposition of large deductible or co-insurance requirements, could have a material
adverse effect on our business, financial condition and results of operations.
Risks Related to Our Business and Industry
The financial and operating difficulties in the telecommunications sector may negatively affect our customers and our
company.
The telecommunications sector has at times faced significant challenges resulting from significant changes in technology
and consumer behavior, excess capacity, poor operating results and financing difficulties. The sector’s financial status has also
at times been uncertain and access to debt and equity capital has been seriously limited. The impact of these events on us could
include slower collection on accounts receivable, higher bad debt expense, uncertainties due to possible customer bankruptcies,
lower pricing on new customer contracts, lower revenues due to lower usage by the end customer and possible consolidation
among our customers, which will put our customers and operating performance at risk. In addition, because we operate in the
communications sector, we may also be negatively impacted by limited access to debt and equity capital.
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If we do not continue to improve our operational, financial and other internal controls and systems to manage our growth
and size, our business, results of operations and financial condition could be adversely affected.
Our historic and anticipated growth will continue to place significant demands on our management and other resources and
will require us to continue to develop and improve our operational, financial and other internal controls. In particular, our
growth will increase the challenges involved in:
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recruiting, training and retaining technical, finance, marketing and management personnel with the knowledge, skills
and experience that our business model requires;
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developing and improving our internal administrative infrastructure, particularly our financial, operational,
communications and other internal systems;
preserving our culture, values and entrepreneurial environment; and
effectively managing our personnel and operations and effectively communicating to our personnel worldwide our
core values, strategies and goals.
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In addition, the increasing size and scope of our operations increases the possibility that a member of our personnel will
engage in unlawful or fraudulent activity, breach our contractual obligations, or otherwise expose us to unacceptable business
risks, despite our efforts to train our people and maintain internal controls to prevent such instances. If we do not continue to
develop and implement the right processes and tools to manage our enterprise, our business, results of operations and financial
condition could be adversely affected.
We recently announced our new strategy to focus on our cloud-centric solutions. There can be no guarantee that this
strategy will be successful or that we will experience consistent and sustainable profitability in the future as a result of our
new strategy.
We have recently made a major announcement to pivot our strategy to focus on our cloud-centric solutions moving
forward. In connection with our new strategy, we consummated a divestiture of our Messaging Solutions and Digital Solutions
business units, which closed in October 31, 2023. We cannot guarantee that our strategy is the right one or that we will be
effective in executing our strategy. Our strategy may not succeed for a number of reasons, including, but not limited to: general
economic risks; execution risks with acquisitions; risks associated with sales not materializing based on a change in
circumstances; disruption to sales; increasing competitiveness in the cloud-based software markets; our ability to retain key
personnel; the dynamic nature of the markets in which we operate; specific economic risks in different geographies and among
different customer segments; changes in foreign currency exchange rates; uncertainty regarding increased business and
renewals from existing customers; uncertainties around continued success in sales growth and market share gains; failure to
convert sales pipeline into final sales; risks associated with successful implementation of multiple integrated software products
and other product functionality risks; execution risks around new product development and introductions and innovation;
product defects; unexpected costs, assumption of unknown liabilities and increased costs for any reason; potential litigation and
disputes and the potential costs related thereto; distraction and damage to sales and reputation caused thereby; market
acceptance of new products and services; the ability to attract and retain personnel; risks associated with management of
growth; lengthy sales and implementation cycles, particularly in larger organizations; technological changes that make our
products and services less competitive; risks associated with the adoption of, and demand for, our model in general and by
specific customer segments; competition and pricing pressure.
If one or more of the foregoing risks were to materialize, our business, results of operations and ability to achieve sustained
profitability could be adversely affected.
Though acceptance of cloud-based software has advanced in recent years, some businesses may still be hesitant to adopt
these types of solutions. If the market for cloud-based software declines or develops more slowly than we expect, our
business could be adversely affected.
Our cloud-based service strategy may not be successful. We enable our customers to offer their subscribers the ability to
backup, restore and share content across multiple devices through a cloud-based environment. Some businesses may still be
uncertain as to whether a cloud-based service like ours is appropriate for their business needs. The success of our offerings is
dependent upon continued acceptance by and growth in subscribers of cloud-based services in general and there can be no
guarantee of the adoption rate by these subscribers. Many organizations have invested substantial personnel and financial
resources to integrate traditional enterprise software into their organizations and, therefore, may be reluctant or unwilling to
migrate to a cloud-based model for storing, accessing, sharing and managing their content. Because we derive, and expect to
continue to derive, a substantial portion of our revenue and cash flows from sales of our cloud-based solutions, our success will
depend to a substantial extent on the widespread adoption of cloud computing for companies in general. Our cloud strategy will
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continue to evolve, and we may not be able to compete effectively, generate significant revenues or maintain profitability.
While we believe our expertise, investments in infrastructure, and the breadth of our cloud-based services provides us with a
strong foundation to compete, it is uncertain whether our strategies will attract the users or generate the revenue required to be
successful. In addition to software development costs, we incur costs to build and maintain infrastructure to support cloud-
based services. It is difficult to predict customer adoption rates and demand for our services, the future growth rate and size of
the cloud computing market or the entry of competitive services. The expansion of a cloud-based enterprise software market
depends on a number of factors, including the cost, performance and perceived value associated with cloud computing, as well
as the ability of companies that provide cloud-based services to address security and privacy concerns. If we or other providers
of cloud-based services experience security incidents, loss of customer data, disruptions in delivery or other problems, the
market for cloud-based services as a whole, including our services, may be negatively affected. If there is a reduction in demand
for cloud-based services caused by a lack of customer acceptance, technological challenges, weakening economic conditions,
security or privacy concerns, competing technologies and products, decreases in corporate spending or otherwise, we could
experience decreased revenue, which could harm our growth rates and adversely affect our business and operating results.
The success of our business depends on the continued growth in demand for connected devices and the continued
availability of high-speed access to the Internet.
The future success of our business depends upon the continued growth in demand for connected devices and business
transactions on the Internet, and on our customers having high-speed access to the Internet, as well as the continued
maintenance and development of the Internet infrastructure. While we believe the market for connected devices will continue to
grow for the foreseeable future, we cannot accurately predict the extent to which demand for connected devices will increase, if
at all. If the demand for connected devices were to slow down or decline or the supply of connected devices to our customers is
impacted for any reason, such as public health epidemics or concerns, our business and results of operations may be adversely
affected. If for any reason the Internet does not remain a widespread communications medium and commercial platform, the
demand for our services would be significantly reduced, which would harm our business, results of operations and financial
condition. To the extent the Internet continues to experience increased numbers of users, frequency of use or bandwidth
requirements, the Internet may become congested and be unable to support the demands placed on it, and its performance or
reliability may decline. Any future Internet outages or delays could adversely affect our business, results of operation and
financial condition.
Our business growth would be impeded if the performance or perception of the Internet was harmed by security problems
such as “viruses,” “worms” or other malicious programs, reliability issues arising from outages and damage to Internet
infrastructure, delays in development or adoption of new standards and protocols to handle increased demands of Internet
activity, increased costs, decreased accessibility and quality of service, or increased government regulation and taxation of
Internet activity. The Internet has experienced, and is expected to continue to experience, significant user and traffic growth,
which has, at times, caused user frustration with slow access and download times. If Internet activity grows faster than Internet
infrastructure or if the Internet infrastructure is otherwise unable to support the demands placed on it, or if hosting capacity
becomes scarce, the growth of our business and operating results may be adversely affected.
The SaaS pricing model is evolving and our failure to manage its evolution and demand could lead to lower than expected
revenue and profit.
We derive a portion of our revenue growth from subscription offerings and specifically SaaS offerings. This business
model depends heavily on achieving economies of scale due to the initial upfront investment, and the associated revenue is
recognized on a ratable basis. Our customers typically have no contractual obligation to renew their subscriptions after
completion of their then-current subscription term. We may be unable to predict future customer renewal rates accurately. Our
renewal rates may decline or fluctuate as a result of a number of actors, including our customers’ level of satisfaction with our
offerings, our offerings’ inability to integrate with new or changing technologies, the prices of our offerings, competing
products, reductions in our customers’ spending levels or general, industry-specific or local economic conditions. If we fail to
achieve appropriate economies of scale or if we fail to manage or anticipate the evolution and demand of the SaaS pricing
model, then our business and operating results could be adversely affected.
Because subscription revenue related to our SaaS offerings is typically recognized ratably over time, we expect to
experience near-term revenue growth as more customers move to our SaaS subscriptions. If we do not achieve near term
growth, we may not be able to adjust our cost structure in response to changes in subscription agreements in a period. Also,
since revenue from SaaS subscriptions is recognized over the term of their subscriptions, it is difficult for us to rapidly increase
revenue through additional sales in any period. We forecast our future revenue and operating results and provide financial
projections based on a number of assumptions, including a forecasted rate of subscription bookings. In addition, our
subscription based offerings may be invoiced over multiple reporting periods, which could subject us to additional collection
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and credit risks, particularly if a customer does not plan to renew these subscriptions. If any of our assumptions about our
business model or the estimated subscriptions are incorrect, our revenue and operating results may be impacted and could vary
materially from those we provide as guidance or from those anticipated by investors and analysts. If we are unable to manage
our SaaS pricing model in light of the foregoing risks and uncertainties, our business, results of operations and financial
condition would be negatively impacted.
Our business depends substantially on customers renewing and expanding their subscriptions for our services. Any decline
in our customer renewals and expansions would harm our future operating results.
We enter into subscription agreements with certain of our customers that are generally one to three years. As a result,
maintaining the renewal rate of those subscription agreements is critical to our future success. We cannot provide assurance that
any of our customer agreements will be renewed, as our customers have no obligation to renew their subscriptions for our
services after the expiration of the initial term of their agreements. The loss of any customers that individually or collectively
account for a significant amount of our revenues would have a material adverse effect on our results of operations or financial
condition. Additionally, our customer’s consumers may become dissatisfied with their current service provider and may switch
to another provider. In the event that there is substantial subscriber migration from our existing customers to service providers
with which we do not have relationships, the fees that we receive on a per-subscriber basis, and the related revenue could
decline. If our renewal rates are lower than anticipated or decline for any reason, if customers renew on terms less favorable to
us, or if there’s a substantial subscriber migration from our customers, our revenue may decrease, and our profitability and
gross margin may be harmed, which would have a material adverse effect on our business, results of operations and financial
condition.
If we fail to compete successfully with existing or new competitors, our business could be harmed.
If we fail to compete successfully with established or new competitors, it could have a material adverse effect on our
results of operations and financial condition. The industries in which we operate are highly competitive and fragmented, and we
expect competition to increase. We compete with independent providers of cloud solutions and services and with the in-house
departments of our OEMs and communications services companies’ customers. Rapid technological changes, such as
advancements in software integration across multiple and incompatible systems, and economies of scale may make it more
economical for CSPs, MSOs or OEMs to develop their own in-house processes and systems, which may render some of our
products and services less valuable or, eventually, obsolete. Our competitors include firms that provide comprehensive SaaS
solutions and managed services solutions, BYOD providers, systems integrators, clearinghouses and service bureaus. Many of
our competitors have long operating histories, large customer bases, substantial financial, technical, sales, marketing and other
resources and strong name recognition.
Current and potential competitors have established, and may establish in the future, cooperative relationships among
themselves or with third parties to increase their ability to address the needs of our current or prospective customers. In
addition, our competitors have acquired, and may continue to acquire in the future, companies that may enhance their market
offerings. Accordingly, new competitors or alliances among competitors may emerge and rapidly acquire significant market
share. As a result, our competitors may be able to adapt more quickly than us to new or emerging technologies and changes in
customer requirements and may be able to devote greater resources to the promotion and sale of their products. These
relationships and alliances may also result in transaction pricing pressure, which could result in large reductions in the selling
prices of our products and services. Our competitors or our customers’ in-house solutions may also provide services at a lower
cost, significantly increasing pricing pressure on us. We may not be able to offset the effects of this potential pricing pressure.
Our failure to adapt to changing market conditions and to compete successfully with established or new competitors may have a
material adverse effect on our results of operations and financial condition. In particular, a failure to offset competitive
pressures brought about by competitors or in-house solutions developed by our customers could result in a substantial reduction
in or the outright termination of our contracts with some of our customers, which would have a significant, negative and
material impact on our business, results of operations and financial condition.
The markets in which we market and sell our products and services are highly competitive, and if we do not adapt to rapid
technological change, we could lose customers or market share, which could adversely affect our ability to sustain or grow
revenue.
The industries we serve are characterized by rapid technological change and frequent new service offerings and are highly
competitive with respect to the need for innovation, including the use of artificial intelligence and machine learning. The
industries also demand frequent and, at times, significant technology upgrades and changes. Significant technological upgrades
and changes could make our technology and services obsolete, less marketable or less competitive. We must adapt to these
rapidly changing markets by continually improving the features, functionality, reliability and responsiveness of our products
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and services, and by developing new features, services and applications to meet changing customer needs and further address
the markets we serve. Our ability to take advantage of opportunities in the markets we serve may require us to invest in
development and incur other expenses well in advance of our ability to generate revenues from these offerings or services. We
may not be able to timely adapt to these challenges or respond successfully or in a cost-effective way and we will not have the
resources to invest in all existing and potential technologies. As a result, we expect to concentrate our resources on those
technologies that we believe have or will achieve substantial customer acceptance and in which we will have appropriate
technical expertise. However, existing products often have short product life cycles characterized by declining prices over their
lives. In addition, our choices for developing technologies may prove incorrect if customers do not adopt the products that we
develop or if those technologies ultimately prove to be unviable. Our failure to successfully adapt would adversely affect our
ability to compete and retain customers and/or market share and could adversely affect our ability to sustain or grow revenue.
Our revenues and operating results will depend, to a significant extent, on our ability to maintain a product portfolio and service
capability that is attractive to our current and future customers; to enhance our existing products; to continue to introduce new
products successfully and on a timely basis; and to develop new or enhance existing tools for our services offerings. The
development of new technologies remains a significant risk to us, due to the efforts that we still need to make to achieve
technological feasibility, due to rapidly changing customer markets; and due to significant competitive threats. In addition, as
we expand our service offerings, we may face competition from new and existing competitors. It is also possible that our
customers could decide to create, invest in or collaborate in the creation of competitive products that might limit or reduce their
need for our products, services and solutions. Further, we may experience delays in the development of one or more features of
our offerings, which could materially reduce the potential benefits to us providing these services. In addition, our present or
future service offerings may not satisfy the evolving needs of the industry in which we operate. If we are unable to anticipate or
respond adequately to these evolving market needs, due to resource, technological or other constraints, our business and results
of operations could be harmed. In addition, the arrival of new market entrants could reduce the demand for our services or
cause us to reduce our pricing, resulting in a loss of revenue and adversely affecting our business, results of operations and
financial condition. Also, the use of internal technologies, developed by our customers or their advisers, could reduce the
demand for our services, result in pricing pressures or cause a reduction in our revenue. If we fail to manage these challenges
adequately, our business, results of operations and financial condition could be adversely affected.
Consolidation in the telecommunications, media and technology industry or the other industries that we serve can reduce
the number of actual and potential customers and adversely affect our business.
There has been, and there continues to be, merger, acquisition and consolidation activity among our customers. Mergers,
acquisitions or consolidations of companies in the communications industry or other industries that we serve, have reduced and
may continue to reduce the number of our customers and potential customers for our solutions, resulting in a smaller market for
our services, which could have a material adverse impact on our business and results of operations. In addition, it is possible
that the larger institutions that result from mergers or consolidations could themselves perform some or all of the services that
we currently provide or could provide in the future. Should one or more of our significant customers acquire, consolidate or
enter into an alliance with an entity or decide to either use a different service provider or to manage its transactions internally,
this could have a negative material impact on our business. Any such consolidations, alliances or decisions to manage
transactions internally may cause us to lose customers or require us to reduce prices as a result of enhanced customer leverage,
which would have a material adverse effect on our business. We may not be able to offset the effects of any price reductions.
We may not be able to expand our customer base to make up any revenue declines if we lose customers or if our transaction
volumes decline.
The success of our business depends on our ability to achieve or sustain market acceptance of our services and solutions at
desired pricing levels.
Our competitors and customers may cause us to reduce the prices we charge for our services and solutions. Our current or
future competitors may offer our customers services at reduced prices or bundling and pricing services in a manner that may
make it difficult for us to compete. Customers with a significant volume of transactions may attempt to use this leverage in
pricing negotiations with us. Also, if our prices are too high, current or potential customers may find it economically
advantageous to handle certain functions internally instead of using our services. We may not be able to offset the effects of any
price reductions by increasing the number of transactions we handle or the number of customers we serve, by generating higher
revenue from enhanced services or by reducing our costs. If these or other sources of pricing pressure cause us to reduce the
pricing of our service or solutions below desirable levels, our business and results of operations may be adversely affected.
We rely in part on strategic relationships with third parties to sell and deliver our solutions. If we are unable to successfully
develop and maintain these relationships, our business may be harmed.
In addition to generating customer referrals through third-party users of our solutions, we intend to pursue relationships
with other third parties such as technology and content providers and implementation and distribution partners. Our future
growth will depend, at least in part, on our ability to enter into and maintain successful strategic relationships with these third
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parties. Identifying partners and negotiating and documenting relationships with them requires significant time and resources,
as does integrating third-party content and technology. Some of our contracts with third parties may require us to meet certain
minimum spend commitment obligations. These commitments could have an adverse effect on our operating results if we are
not able to generate sufficient sales to satisfy the minimum commitments. Some of the third parties with whom we have
strategic relationships have entered and may continue to enter into strategic relationships with our competitors. Further, these
third parties may have multiple strategic relationships and may not regard us as significant for their businesses. As a result, they
may choose to offer their services on terms that are unfavorable to us, terminate their respective relationships with us, pursue
other partnerships or relationships, or attempt to develop or acquire services or solutions that compete with ours. Our
relationships with strategic partners could also interfere with our ability to enter into desirable strategic relationships with other
potential partners in the future. If we are unsuccessful in establishing or maintaining relationships with strategic partners on
favorable economic terms, our ability to compete in the marketplace or to grow our revenue could be impaired, and our
business, results of operations and financial condition would suffer. Even if we are successful, we cannot provide assurance that
these relationships will result in increased revenue or customer usage of our solutions or that the economic terms of these
relationships will not adversely affect our margins.
If we do not maintain the compatibility of our services with third-party applications that our customers use in their business
processes or if we fail to adapt our services to changes in technology or the marketplace, demand for our services could
decline.
Our solutions can be used alongside a wide range of other systems such as email and enterprise software systems used by
our customers in their businesses. If we do not support the continued integration of our products and services with third-party
applications, including through the provision of application programming interfaces that enable data to be transferred readily
between our services and third-party applications, demand for our services could decline and we could lose sales or experience
declining renewal rates. We will also be required to make our products and services compatible with new or additional third-
party applications that are introduced to the markets that we serve and, if we are not successful, we could experience reduced
demand for our services. In addition, prospective customers, especially large enterprise customers, may require heavily
customized features and functions unique to their business processes. If prospective customers require customized features or
functions that we do not offer and that would be difficult for them to develop and integrate within our services, then the market
for our products and services may be adversely affected.
We may not currently or in the future appropriately leverage advances in technology to achieve or sustain a competitive
advantage in products, services, information and processes. Our customers and users regularly adopt new technologies and
industry standards continue to evolve. The introduction of products or services and the emergence of new industry standards
can render our existing services obsolete and unmarketable in short periods of time. We expect others to continue to develop
and introduce new and enhance existing products and services that will compete with our services. Our future success will
depend, in part, on our ability to enhance our current services and to develop and introduce new services that keep pace with
technological developments, emerging industry standards and the needs of our customers. We cannot assure that we will be
successful in cost-effectively developing, marketing and selling new services or service enhancements that meet these changing
demands on a timely basis, that we will not experience difficulties that could delay or prevent the successful development,
introduction and marketing of these services, or that our new service and service enhancements will adequately meet the
demands of the marketplace and achieve market acceptance. We also cannot assure that the features that we believe will drive
purchasing decisions will in fact be the features that our current or potential customers consider most significant.
Legal, Regulatory and Compliance Risks
Government regulation of the Internet and e-commerce and of the international exchange of certain information is subject
to possible unfavorable changes, and our failure to comply with applicable regulations could harm our business and
operating results.
As Internet commerce continues to evolve, increasing regulation by federal, state, local and foreign governments become
more likely. For example, in recent years, numerous federal, state, local and foreign laws regarding privacy and the collection,
processing, storage, sharing, disclosure, use or protection of personal information and other data have been enacted. The scope
of these laws is expanding, they are subject to differing interpretations and may be costly to comply with and may be
inconsistent between countries and jurisdictions or conflict with other rules. Further, laws and regulations applying to the
solicitation, collection, processing or use of personal or consumer information could affect our customers’ ability to use and
share data, potentially reducing demand for our products and services. In addition, taxation of products and services provided
over the Internet or other charges imposed by government agencies or by private organizations for accessing the Internet may
also be imposed. Any regulation imposing greater fees for Internet use or restricting the exchange of information over the
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Internet could result in reduced growth or a decline in the use of the Internet and could diminish the viability of our Internet-
based services, which could harm our business and operating results.
Failure to comply with laws and regulations applicable to our business could subject us to fines and penalties and could also
cause us to lose customers or negatively impact our ability to contract with customers.
Our business is subject to regulation by various federal, state, local and foreign governmental agencies, including agencies
responsible for monitoring and enforcing employment and labor laws, antitrust laws, workplace safety, product safety,
environmental laws, consumer protection laws, anti-bribery laws, import/export controls, federal securities laws and tax laws
and regulations. In certain jurisdictions, these regulatory requirements may be more stringent than in the United States.
Noncompliance with applicable regulations or requirements could subject us to investigations, sanctions, mandatory product
recalls, enforcement actions, disgorgement of profits, fines, damages and civil and criminal penalties or injunctions. If any
governmental sanctions are imposed, or if we do not prevail in any possible civil or criminal litigation, our business, reputation,
operating results and financial condition could be adversely affected. In addition, responding to any action will likely result in a
significant diversion of management’s attention and resources and an increase in third-party professional fees. Enforcement
actions and sanctions could harm our business, operating results and financial condition.
These laws and regulations impose added costs on our business, and failure to comply with these or other applicable
regulations and requirements, could lead to claims for damages from our channel partners, penalties or termination of contracts.
Any such damages, penalties, disruptions or limitations in our ability to do business could have an adverse effect on our
business and operating results.
Changes in laws, regulations or governmental policy applicable to our customers or potential customers may decrease the
demand for our solutions or increase our costs.
The level of our customers’ and potential customers’ activity in the business processes our services are used to support is
sensitive to many factors beyond our control, including governmental regulation and regulatory policies. Many of our
customers and potential customers in the telecommunications and other industries are subject to substantial regulation and may
be the subject of further regulation in the future. Accordingly, significant new laws or regulations or changes in, or repeals of,
existing laws, regulations or governmental policy may change the way these customers do business and could cause the demand
for and sales of our solutions to decrease. Any change in the scope of applicable regulations that either decreases the volume of
transactions that our customers or potential customers enter into or otherwise negatively impacts their use of our solutions
would have a material adverse effect on our revenues or gross margins, or both. Moreover, complying with increased or
changed regulations could cause our operating expenses to increase as we may have to reconfigure our existing services or
develop new services to adapt to new regulatory rules and policies, either of which would require additional expense and time.
Additionally, the information provided by, or residing in, the software or services we provide to our customers could be deemed
relevant to a regulatory investigation or other governmental or private legal proceeding involving our customers, which could
result in requests for information from us that could be expensive and time consuming for us to address or harm our reputation
since our customers rely on us to protect the confidentiality of their information. These types of changes could adversely affect
our business, results of operations and financial condition.
Our expansion into additional international markets may be subject to uncertainties that could increase our costs to comply
with regulatory requirements in foreign jurisdictions, disrupt our operations and require increased focus from our
management.
Our growth strategy includes the growth of our operations in foreign jurisdictions. International operations are subject to
numerous additional risks, including economic and political risks in foreign jurisdictions in which we operate or seek to
operate, potential additional costs due to localization and other geographic specific costs, difficulty in enforcing contracts and
collecting receivables through some foreign legal and financial systems, unexpected changes in legal and regulatory
requirements, differing technology standards and pace of adoption, fluctuations in currency exchange rates, varying regional
and geopolitical business conditions and demands. The difficulties associated with managing a large organization spread
throughout various countries and potential tax issues, including restrictions on repatriating earnings and multiple changing and
complex tax laws and regulations, and the differences in foreign laws and regulations, including foreign tax, data privacy
requirements, anti-competition, intellectual property, labor, trade and other laws. Additionally, compliance with international
and U.S. laws and regulations that apply to our international operations may increase our cost of doing business in foreign
jurisdictions. Violation of these laws and regulations could result in fines, criminal sanctions against us, our officers or our
employees, or prohibitions on the conduct of our business. Sanctions imposed by the United States and other countries with
respect to countries involved in conflict may impact our ability to offer services in the region, and additional sanctions or
retaliatory measures could be imposed in the future. Further instability or tension in the geopolitical climate could also cause us
to adjust our operating model, which would increase our costs of operations. As we continue to expand our business globally,
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our success will depend, in large part, on our ability to anticipate and effectively manage these and other risks associated with
our international operations. However, any of these factors could adversely affect our international operations and,
consequently, our operating results.
Failure to comply with anticorruption and anti-money laundering laws, including the U.S. Foreign Corrupt Practices Act of
1977, as amended ("FCPA"), and similar laws associated with our activities outside of the United States could subject us to
penalties and other adverse consequences.
We are subject to the FCPA, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, the USA
PATRIOT Act, the United Kingdom Bribery Act of 2010 ("U.K. Bribery Act") and other anti-bribery and anti-money
laundering laws in countries in which we conduct activities. We face significant risks if we fail to comply with the FCPA and
other anticorruption laws that prohibit companies and their employees and third-party intermediaries from authorizing, offering
or providing, directly or indirectly, improper payments or benefits to foreign government officials, political parties and private-
sector recipients for the purpose of obtaining or retaining business, directing business to any person or securing any advantage.
In many foreign countries, particularly in countries with developing economies, it may be a local custom that businesses engage
in practices that are prohibited by the FCPA or other applicable laws and regulations. In addition, we use various third parties to
sell our solutions and conduct our business abroad. We or our third-party intermediaries may have direct or indirect interactions
with officials and employees of government agencies or state-owned or affiliated entities and we can be held liable for the
corrupt or other illegal activities of these third-party intermediaries, our employees, representatives, contractors, partners and
agents, even if we do not explicitly authorize such activities. We continue to update and implement our FCPA/anti-corruption
compliance program and no assurance can be given that all of our employees and agents, as well as those companies to which
we outsource certain of our business operations, will not take actions in violation of our policies and applicable law, for which
we may be ultimately held responsible.
Any violation of the FCPA, other applicable anticorruption laws and anti-money laundering laws could result in
whistleblower complaints, adverse media coverage, investigations, loss of export privileges, severe criminal or civil sanctions
and, in the case of the FCPA, suspension or debarment from U.S. government contracts, which could have a material and
adverse effect on our reputation, brand, business, operating results and prospects. In addition, responding to any enforcement
action may result in a materially significant diversion of management’s attention and resources and significant defense costs
and other third-party professional fees.
If we are unable to protect our intellectual property rights, our competitive position could be harmed, or we could be
required to incur significant expenses to enforce our rights.
Our success depends to a significant degree upon the protection of our software and other proprietary technology rights.
We rely on trade secret, copyright and trademark laws and confidentiality agreements with employees and third parties, all of
which offer only limited protection. We also regularly file patent applications to protect inventions arising from our research
and development and have obtained a number of patents in the United States and other countries. There can be no assurance
that our patent applications will be approved, that any issued patents will adequately protect our intellectual property, or that our
patents will not be challenged by third parties. Also, much of our business and many of our solutions rely on key technologies
developed or licensed by third or other parties and we may not be able to obtain or continue to obtain licenses and technologies
from these third parties at all or on reasonable terms. The steps we have taken to protect our intellectual property may not
prevent misappropriation of our proprietary rights or the reverse engineering of our solutions. Legal standards relating to the
validity, enforceability and scope of protection of intellectual property rights in other countries are uncertain and may afford
little or no effective protection of our proprietary technology. Consequently, we may be unable to prevent our proprietary
technology from being exploited abroad, which could require costly efforts to protect our technology. Policing the unauthorized
use of our products, trademarks and other proprietary rights is expensive, difficult and, in some cases, impossible. Litigation
may be necessary in the future to enforce or defend our intellectual property rights, to protect our trade secrets or to determine
the validity and scope of the proprietary rights of others. This type of litigation could result in substantial costs and diversion of
management resources, either of which could materially harm our business. Accordingly, despite our efforts, we may not be
able to prevent third parties from infringing upon or misappropriating our intellectual property.
We collect, process, store, disclose and use personal information and other data, and our actual or perceived failure to
protect this information and data could damage our reputation and harm our business and operating results.
In the ordinary course of our business, we and our current or future third-party collaborators, service providers, contractors
and consultants collect, process, store, disclose and use personal information (also referred to as “personal data” or “personally
identifiable information” under certain data privacy laws) and other data provided by our customers and their end users. We
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rely on encryption and authentication technology licensed from third parties to effectively secure transmission of this
information.
We are, or may become subject to various federal, state, local and foreign laws, related regulations, and industry standards
regarding privacy and the collection, processing, storage, sharing, disclosure, use or protection of personal information and
other data. The scope of these laws is changing, they are subject to differing interpretations from one jurisdiction to another,
and they may be costly to comply with and may be inconsistent between countries and jurisdictions or conflict with other rules
or our practices. As a result, our practices may not have complied in the past or may not comply now or in the future with all
such laws, regulations, requirements or obligations.
In the United States, our collection, processing, storage, disclosure and use of personal information is subject to a variety of
laws and regulations, including federal and state data privacy laws, data breach notification laws, and consumer protection laws.
Many state legislatures have adopted legislation that regulates how businesses operate online, including measures relating to
privacy, data security, and data breaches. For example, the California Consumer Privacy Act of 2018, as amended by the
California Privacy Rights Act of 2020 (“CPRA”) created new individual privacy rights for consumers (as that term is broadly
defined), places increased privacy and security obligations on entities handling personal data of consumers or households, and
creates a new state agency that will be vested with authority to implement and enforce the CPRA. The CPRA took effect on
January 1, 2023, and it may require us to modify our data collection or processing practices and policies and to incur substantial
costs and expenses in an effort to comply and increase our potential exposure to regulatory enforcement and/or litigation. Other
states have passed similar laws, reflecting a trend toward more stringent privacy legislation in the United States. Other states
have also passed specific laws mandating reasonable security measures for the handling of personal information.
In Europe, we are subject to the European Union General Data Protection Regulations (Regulation (EU) 2016/679) (the
“EU GDPR”) and to the United Kingdom General Data Protection Regulation and Data Protection Act 2018 (the “UK GDPR”)
(the EU GDPR and UK GDPR referred to collectively as the “GDPR”). The GDPR imposes comprehensive compliance
obligations regarding our processing of personal data, including a principle of accountability and the obligation to demonstrate
compliance through policies, procedures, training, and audits. Further, the GDPR regulates cross-border transfers of personal
data out of the European Economic Area (“EEA”) and the United Kingdom (“UK”). On July 16, 2020, the Court of Justice of
the European Union (the “CJEU”) ruled in its decision in the case of Data Protection Commissioner v. Facebook Ireland
Limited, Maximillian Schrems (Case C-311/18) (“Schrems II”) that the EU-US Privacy Shield Framework (“Privacy Shield”)
was invalid and could no longer be relied upon as a basis for international transfers of personal data out of the EEA to relevant
self-certified U.S. entities. The CJEU further noted that reliance on the European Commission Standard Contractual Clauses
(“SCCs”) (a potential alternative transfer mechanism to the Privacy Shield) alone may not necessarily be sufficient in all
circumstances and that transfers must be assessed on a case-by-case basis. Synchronoss and our customers continue to use
alternative transfer strategies, including the SCCs. As the enforcement landscape further develops, supervisory authorities issue
further guidance on international data transfers, and governments work to reach agreements on additional transfer mechanisms,
we may experience additional costs, complaints and/or regulatory investigations or fines; we may have to stop using certain
tools and vendors and make other operational changes; we have had to and will have to implement revised SCCs for existing
customer and vendor arrangements within required time frames; and/or it could otherwise affect the manner in which we
provide our services, and could adversely affect our business, operations and financial condition. Failure to comply with the EU
GDPR and the UK GDPR could result in penalties under each of these regimes independently in the respect of the same
violation. Penalties for certain violations are up to the greater of EUR 20 million / GBP 17.5 million or 4% of our global annual
turnover. In addition to fines, a violation of the GDPR may result in regulatory investigations, reputational damage, orders to
cease/change our data processing activities, enforcement notices, assessment notices (for compulsory audits) and/or civil claims
(including class action lawsuits).
We are also subject to evolving EU and UK privacy laws on cookies, tracking technologies and e-marketing. If regulators
continue their trend of increasing enforcement of the strict approach to opt-in consent for all but essential use cases and given
the complex and evolving nature of EU and UK privacy laws, this may lead to substantial costs, require significant systems
changes, limit the effectiveness of our marketing activities, require that we divert the attention of our technology personnel,
adversely affect our margins, subject us to additional liabilities and there can be no assurances that we will be successful in our
compliance efforts.
In addition to the EU and UK, a growing number of other global jurisdictions are considering or have passed legislation
implementing data protection requirements or requiring local storage and processing of data or similar requirements that could
increase the cost and complexity of delivering our offerings. Some of these laws, such as the General Data Protection Law in
Brazil, or the Act on the Protection of Personal Information in Japan, impose similar obligations as those under the GDPR.
Others, such as those in Russia, India, and China, could potentially impose more stringent obligations, including data
localization requirements. If we are unable to develop and offer features that meet legal requirements or help our customers
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meet their obligations under the laws or regulations relating to privacy, data protection, or information security, or if we violate
or are perceived to violate any laws, regulations, or other obligations relating to privacy, data protection, or information
security, we may experience reduced demand for our offerings, harm to our reputation, and become subject to investigations,
claims, and other remedies, which would expose us to significant fines, penalties, and other damages, all of which would harm
our business.
Compromises to our privacy safeguards or disclosure of confidential information could impact our reputation.
Names, addresses, telephone numbers, credit card data and other personal identification information are collected,
processed and stored in our systems. Our treatment of this kind of information is subject to contractual restrictions and federal,
state and foreign data privacy laws and regulations. Advances in technology, the expertise of criminals, new discoveries in the
field of cryptography, acts or omissions by our employees, contractors or service providers or other events or developments
could result in a compromise or breach in the security of confidential or sensitive information. Our security measures and those
of our service providers may be breached or compromised by individuals or groups of hackers, including sophisticated
organizations and nation states, or compromised by personnel error or malfeasance. Techniques used to compromise or
sabotage systems change frequently and generally are not recognized until launched against a target. As a result, we may be
unable to anticipate these techniques or to implement adequate preventative measures. We and our service providers, therefore,
may not be able to prevent third parties, including criminals, competitors or others, from breaking into or altering our systems,
conducting denial-of-service attacks, attempting to gain access to our systems, information or monetary funds through phishing
or social engineering campaigns, installing viruses or malicious software on our website or devices used by our employees or
contractors, or carrying out other activity intended to disrupt our systems or gain access to confidential or sensitive information
in our or our service providers’ systems. Furthermore, such third parties may further engage in various other illegal activities
using such information, including credit card fraud, which may cause additional harm to us, our users and our brand. Third
parties may attempt to fraudulently induce our or our service providers’ employees to misdirect funds or to disclose information
in order to gain access to personal data we maintain about our users or website users.
Any accidental unauthorized access to or disclosure, loss, disablement or encryption of, acquisition, use or misuse of or
modification of confidential or sensitive information, processing or destruction of this information, or unavailability of
information that we or our partners could experience or the perception that one has occurred or may occur, could expose us to
regulatory actions, litigation, investigations, remediation obligations, damage to our reputation and brand, supplemental
disclosure obligations, loss of customer, consumer and partner confidence in the security of our applications, destruction of
information, indemnity obligations, impairment to our business and resulting fees, costs, expenses, loss of revenues and other
potential liabilities. Moreover, there could be public announcements regarding any such incidents and any steps we take to
respond to or remediate such incidents. Security incidents could disrupt operation of our products or result in unauthorized
access to, unauthorized use or disclosure of, the inaccessibility of or loss of our or our partners’ and users’ sensitive and
confidential information (including intellectual property and personal information). Consequences of these incidents can
include damage to our reputation, early termination of our contracts, loss of business, litigation, regulatory investigations and
other liabilities. Even a perceived security incident could damage the market perception of our business and adversely impact
our results of operations and financial condition. Our efforts to detect, prevent and remediate known or potential security
vulnerabilities may result in additional direct and indirect costs. Finally, if a high profile security breach occurs with respect to
other similarly situated services, our users and potential users may lose trust in the security of such services generally, which
could adversely impact our ability to retain existing users or attract new ones.
We devote financial and personnel resources to implement and maintain security measures. While we have security
measures in place that are designed to protect against these risks, preserve the integrity of customer and personal information
and prevent information loss, misappropriation and other security breaches, our security measures may be compromised as a
result of intentional misconduct, including by computer hackers, employees, contractors or service providers, as well as
software bugs, human error, technical malfunctions or other malfeasance.
If any breach of information security were to occur, our reputation and brand could be damaged, our business may suffer,
we could be required to expend significant capital and other resources to alleviate problems caused by such breaches, and we
could be exposed to a risk of loss, litigation or regulatory action and possible liability. For example, any such event that leads to
unauthorized access, use, or disclosure of personal information, including personal information regarding our customers or
employees, could compel us to comply with federal and/or state breach notification laws and foreign law equivalents, subject us
to mandatory corrective action, and otherwise subject us to liability under laws and regulations that protect the privacy and
security of personal information, including private lawsuits or class actions under the California Consumer Privacy Act, which
could result in significant legal and financial exposure and reputational damages that could potentially have an adverse effect on
our business. Actual or anticipated attacks may cause us to incur increasing costs, including costs to deploy additional personnel
and protection technologies, train employees and engage third-party experts and consultants. Any compromise or breach of our
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security measures, or those of our third-party service providers, may violate applicable privacy, data security and other laws,
and cause significant legal and financial exposure, adverse publicity and a loss of confidence in our security measures, which
could have a material adverse effect on our business, financial condition and results of operations. We may need to devote
significant resources to protect against security breaches or to address problems caused by breaches, diverting resources from
the growth and expansion of our business.
There is increased potential that unauthorized third parties may have access to sensitive company or customer information
as a result of our employees working remotely. For instance, if our employees were to use a non-secure internet network,
conduct their work in a non-secure environment or even fail to take appropriate precautions within their own home, there is a
greater likelihood that an unauthorized person or entity could obtain access to ours or our clients’ sensitive information.
Any or all of these issues could negatively affect our ability to attract new customers, cause existing customers to elect to
terminate or not renew their subscriptions, result in reputational damage, cause us to pay remediation costs, or require us to
compensate our customers or other users for certain losses or result in lawsuits, regulatory fines or other action or liabilities,
which could adversely affect our business and operating results. These risks may increase as we continue to grow and collect,
process, store and transmit increasingly large amounts of data.
Our use of “open source” software could negatively affect our ability to sell our services and subject us to possible litigation.
A portion of the technologies licensed by us incorporates “open source” software, and we may incorporate open source
software in the future. Open source software is generally licensed by its authors or other third parties under open source
licenses. If we fail to comply with these licenses, we may be subject to certain conditions, including requirements that we offer
any of our services that incorporate the open source software at no cost. Additionally, we may be required to make publicly
available any source code for modifications or derivative works we create based upon, incorporating or using the open source
software and/or license those modifications or alterations on terms that are unfavorable to us. If an author or other third party
that distributes open source software were to allege that we had not complied with the conditions of one or more of these
licenses, we could be required to incur significant legal expenses defending against such allegations and could be subject to
significant damages, enjoined from selling those of our services that contained the open source software and required to comply
with the foregoing conditions, which could disrupt the distribution and sale of some of our services. In addition to risks related
to license requirements, usage of open source software can lead to greater risks than use of third-party commercial software, as
open source licensors generally do not provide technology support, maintenance, warranties or assurance of title or controls on
the origin of the software.
Artificial intelligence presents risks and challenges that could affect its adoption, and therefore our business.
As with many technological innovations, artificial intelligence (“AI”) presents risks that could affect its adoption, and
therefore our business. Uncertainty in the egal regulatory regime relating to AI may require significant resources to modify and
maintain business practices to comply with US and non-US regulations, which are currently evolving and uncertain. Several
jurisdictions globally, including Europe and some US states, have recently proposed or adopted laws governing AI.
Additionally, on October 30, 2023, the Biden administration issued an Executive Order to, among other things, establish
extensive new standards for AI safety and security. Other jurisdictions may decide to adopt similar or more restrictive
regulations that may render the use of AI technologies, in particular generative AI, challenging. These compliance obligations
may make it harder for us to conduct our business using AI, lead to regulatory fines or penalties, require us to change our
product offerings or business practices, or prevent or limit our use of AI. If we cannot use AI, or that use is unduly restricted
our business may be less efficient, or we may be at a competitive disadvantage. Any of these factors could adversely affect our
business, financial condition and results of operations.
We continue to incur significant costs as a result of operating as a public company, and our management is required to
devote substantial time to new and ongoing compliance initiatives.
We operate as a public company, and will continue to incur significant legal, accounting and other expenses as we comply
with the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act” or “SOX”), the Dodd-Frank Wall Street Reform and
Consumer Protection Act and other public company disclosure and corporate governance requirements, as well as any new
rules that may subsequently be implemented by the Securities and Exchange Commission and/or Nasdaq, the exchange on
which our common stock is listed These rules impose various requirements on public companies, including requirements
related to disclosures, corporate governance and internal controls. We expect that the requirements of these rules and
regulations will continue to increase our legal, accounting and financial compliance costs, make some activities more difficult,
time consuming and costly and place significant strain on our personnel, systems and resources. Our management and other
personnel will continue to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and
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regulations increase our legal and financial compliance costs and make some activities more time-consuming and costlier. For
example, we expect these rules and regulations may make it more difficult and more expensive for us to obtain director and
officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantial costs to
maintain the same or similar coverage. These rules and regulations could also make it more difficult for us to attract and retain
qualified persons to serve on our board of directors, our board committees or as executive officers.
The Sarbanes-Oxley Act requires, among other things, that we assess the effectiveness of our internal control over financial
reporting annually and the effectiveness of our disclosure controls and procedures quarterly. In particular, Section 404 of the
Sarbanes-Oxley Act, or Section 404, requires us to perform system and process evaluation and testing of our internal controls
over financial reporting to allow management to report on, and our independent registered public accounting firm potentially to
attest to, the effectiveness of our internal controls over financial reporting. Our independent registered public accounting firm is
required to undertake an assessment of our internal control over financial reporting. Our compliance with applicable provisions
of Section 404 requires that we incur substantial accounting expense and expend significant management time on compliance-
related issues as we implement additional corporate governance practices and comply with reporting requirements. Moreover, if
we are not able to comply with the requirements of Section 404 applicable to us in a timely manner, or if we or our independent
registered public accounting firm identifies deficiencies in our internal control over financial reporting that are deemed to be
material weaknesses, the market price of our stock could decline and we could be subject to sanctions or investigations by the
SEC or other regulatory authorities, which would require additional financial and management resources.
Changes in, or interpretations of, tax rules and regulations, results of tax audits and other factors, including timing of tax
refund receipt, could cause fluctuations in or adversely affect our effective tax rates and operating results.
Global tax developments applicable to multinational businesses may have a material impact to our business, cash flow from
operating activities, or financial results. International organizations such as the Organization for Economic Cooperation and
Development, have published Base Erosion and Profit Shifting action plans that, if adopted by countries where we do business,
could increase our tax obligations in these countries. In addition, several countries have proposed or enacted Digital Services
Taxes ("DST"), many of which would apply to revenues derived from digital services. We will continue to assess the ongoing
impact of these current and pending changes to global tax legislation and the impact on our future financial statements upon the
finalization of laws, regulations and additional guidance. In addition, as we continue to evaluate our corporate structure, any
changes to the taxation of undistributed foreign earnings could also change our plans regarding reinvestment of such earnings.
Due to the large scale of our U.S. and international business activities, many of these enacted and proposed changes to the
taxation of our activities could increase our worldwide effective tax rate and have an adverse effect on our operating results,
cash flow or financial condition.
Certain EU and other jurisdictions have introduced anti-hybrid provisions, which came into force in EU member states on
January 1, 2020 (subject to relevant derogations). The scope of these rules is wide-reaching and can apply to disallow certain
deductions for corporate tax purposes where hybrid entities exist within a company structure. These provisions may place
additional burden on our management to assess the impact of the rules and potentially create additional tax costs. EU countries
and other jurisdictions will continue to interpret or issue additional guidance on how provisions of the anti-hybrid will be
applied, which, if applicable, may materially impact our financial statements and cash flow. Separately, as a result of the
complexity of, and lack of clear precedent or authority with respect to, the application of various income tax laws to our
corporate structure, tax authorities may challenge how we report our transactions, which may increase our costs and impact our
operations.
We are subject to income taxes as well as non-income-based taxes, in both the U.S. and various foreign jurisdictions. Many
judgments are required in determining our worldwide provision for income taxes and other tax liabilities, and we are under
audit by various tax authorities, which often do not agree with positions taken by us on our income and non-income-based tax
returns. We currently have significant income tax refunds that are receivable from the U.S. government based in part on
provisions in the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”). Any changes in, or interpretations
of, tax rules and regulations or legislative changes to the CARES Act or significant delays in receiving our tax refund could
adversely impact our financial position and results. Although we believe that our estimates are reasonable, the ultimate tax
outcome may differ from the amounts recorded in our consolidated financial statements and may materially affect our financial
results in the period or periods for which such determination is made. Unanticipated changes in our tax rates could affect our
future results of operations. Our future effective tax rates could be unfavorably affected by changes in tax laws or the
interpretation of tax laws or by changes in the valuation of our deferred tax assets and liabilities. In August 2022, the Inflation
Reduction Act of 2022 (the “IRA”) was signed into law. This law, among other things, provides for a corporate alternative
minimum tax on adjusted financial statement income (effective for us beginning in fiscal 2024), and an excise tax on corporate
stock repurchases (effective for our share repurchases after December 31, 2022), and we are continuing to evaluate the impact it
may have on our financial position and results of operations. There are several proposed changes to U.S. and non-U.S. tax
legislation and the ultimate enactment of any of them could have a negative impact on our effective tax rate. It is possible that
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future requirements, including the recently proposed implementation of International Financial Reporting Standards (“IFRS”)
could change our current application of U.S. GAAP, resulting in a material adverse impact on our financial position or results
of operations. In addition, we are subject to the continued examination of our income tax returns by the Internal Revenue
Service (“IRS”), and other tax authorities. These examinations may challenge certain of our tax positions, such as the timing
and amount of deductions and allocations of taxable income to various jurisdictions. We regularly assess the likelihood of
outcomes resulting from these examinations, if any, to determine the adequacy of our provision for income taxes. We believe
our estimates to be reasonable, but there can be no assurance that the final determination of any of these examinations will not
have an adverse effect on our operating results and financial position.
If we are required to collect sales and use taxes on the services we previously sold in additional jurisdictions, we may be
subject to liability for past sales.
We previously collected sales or use tax on our services in most states as may be required by law. Historically, with a few
exceptions, we have not charged or collected value added tax on our services anywhere in the world. We may lose sales or incur
significant expenses should tax authorities in other jurisdictions where we do business be successful in imposing sales and use
taxes, value added taxes or similar taxes on the services we provided. A successful assertion by one or more tax authorities that
we should collect sales or other taxes on the previous sale of our services could result in substantial tax liabilities for past sales,
including interest and penalty charges, and could discourage customers from purchasing our services and otherwise harm our
business. Further, we may conclude based on our own review that our previous services may be subject to sales and use taxes in
other areas where we previously did business. Under these circumstances, we may voluntarily disclose our estimated liability to
the respective tax authorities and initiate activities to collect taxes. It is not clear that our previous services are subject to sales
and use tax in certain jurisdictions. States and certain municipalities in the United States, as well as countries outside the United
States, have different rules and regulations governing sales and use taxes. These rules and regulations are subject to varying
interpretations that may change over time and, in the future, our services may be subject to such taxes. Although our previous
customer contracts typically provide that our customers are responsible for the payment of all taxes associated with the
provision and use of our services, customers may decline to pay back taxes and may refuse responsibility for interest or
penalties associated with those taxes. In certain cases, we may elect not to request customers to pay back taxes. If we are
required to collect and pay back taxes and associated interest and penalties, and if our customers fail or refuse to reimburse us
for all or a portion of these amounts, or if we elect not to seek payment of these amounts, we will incur unplanned expenses that
may be substantial. Any of the foregoing could have a material adverse effect on our business, results of operation or financial
condition.
Changes in accounting principles, or the interpretation thereof, could have a significant impact on our financial position
and results of operation.
We prepare our Consolidated Financial Statements in accordance with GAAP. A change in these principles can have a
significant impact on our reported results and may even retroactively affect previously reported transactions. The adoption of
new or revised accounting principles may require that we make significant changes to our systems, processes and controls and
could have a significant impact on our financial position and results of operations.
Risks Related to our Series B Preferred Stock, Senior Notes and our Common Stock
Our stock price may continue to experience significant fluctuations and could subject us to litigation.
Our stock price, like that of other technology companies, continues to fluctuate greatly. Our stock price, and demand for
our stock, can be affected by many factors, such as unanticipated changes in management, quarterly increases or decreases in
our earnings, speculation in the investment community about our financial condition or results of operations and changes in
revenue or earnings estimates, announcement of new services, technological developments, alliances, or acquisitions by us.
Additionally, the price of our common stock may continue to fluctuate greatly in the future due to factors that are non-company
specific, such as the decline in the United States and/or international economies, acts of terror against the United States or other
jurisdictions where we conduct business, war or other military conflict or due to a variety of company specific factors,
including quarter to quarter variations in our operating results, shortfalls in revenue, gross margin or earnings from levels
projected by securities analysts and the other factors discussed in these risk factors. Concerns over economic recession, interest
rate increases and inflation, supply chain delays and disruptions, policy priorities of the U.S. presidential administration, trade
wars, unemployment, or prolonged government shutdown may contribute to increased volatility and diminished expectations
for the economy and markets. Additionally, concern over geopolitical issues may also contribute to prolonged market volatility
and instability. The U.S. government and other governments in jurisdictions have imposed severe economic sanctions and
export controls against Russia and Russian interests, have removed Russia from the SWIFT system, and have threatened
additional sanctions and controls. The impact of these measures, as well as potential responses to them by Russia, is unknown.
In addition, if the market for technology stocks or the stock market in general experiences uneven investor confidence, the
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market price of our common stock could decline for reasons unrelated to our business, operating results or financial condition.
Fluctuation in market price and demand for our common stock may limit or prevent investors from readily selling their shares
of common stock and may otherwise negatively affect the liquidity of our common stock. Causes of volatility in the market
price of our stock could subject us to securities class action litigation. We were previously, and may in the future be, the subject
of lawsuits that could require us to incur substantial costs defending against those lawsuits and divert the time and attention of
our management.
We have, and in the future may be, the target of stockholder derivative complaints or other securities related legal actions
that could adversely affect our results of operations and our business.
We have, and in the future may be, the target of stockholder derivative complaints or other securities related legal actions.
The existence of any litigation may have an adverse effect on our reputation with referral sources and our customers
themselves, which could have an adverse effect on our results of operations and financial condition. The outcome and amount
of resources needed to respond to, defend or resolve lawsuits is unpredictable and may remain unknown for long periods of
time. Our exposure under these matters may also include our indemnification obligations, to the extent we have any, to current
and former officers and directors and, in some cases former underwriters, against losses incurred in connection with these
matters, including reimbursement of legal fees and other expenses. For instance, on June 7, 2022, the SEC filed a civil action
against two former members of our management team, alleging misconduct arising out of the restated transactions that took
place in 2015 and 2016 investigated by the Securities and Exchange Commission (“SEC”). We may be required to indemnify
these individuals in connection with such action. We may be required to indemnify the former members of our management
team for a loss. Although we maintain insurance for claims of this nature, our insurance coverage does not apply in all
circumstances and may be denied or insufficient to cover the costs related to the class action and stockholder derivative
lawsuits. Large indemnity payments, individually or in the aggregate, could have a material impact on our financial position. In
addition, future lawsuits or legal claims involving us may increase our insurance premiums, deductibles or co-insurance
requirements or otherwise make it more difficult for us to maintain or obtain adequate insurance coverage on acceptable terms,
if at all. Moreover, adverse publicity associated with negative developments in any such legal proceedings could decrease
customer demand for our services. As a result, future lawsuits involving us, or our officers or directors, could have a material
adverse effect on our business, reputation, financial condition, results of operations, liquidity and the trading price of our
common stock.
Other than payment of dividends on our Preferred Stock, we have never paid dividends on our capital stock and we do not
anticipate paying any dividends in the foreseeable future. Consequently, any gains from an investment in our common stock
will likely depend on whether the price of our common stock increases.
Other than the payment of dividends, either in-kind or in cash, on our Preferred Stock, we have not paid dividends on any
of our classes of capital stock and we currently intend to retain our future earnings, if any, to fund the development and growth
of our business. In addition, the terms of our current credit agreement and any future indebtedness that we may incur could
preclude us from paying dividends. As a result, capital appreciation, if any, of our common stock will be a shareholder’s sole
source of gain for the foreseeable future. Consequently, in the foreseeable future, a shareholder will likely only experience a
gain from an investment in our common stock if the price of our common stock increases.
Delaware law and provisions in our restated certificate of incorporation and amended and restated bylaws could make a
merger, tender offer or proxy contest difficult, therefore depressing the trading price of our common stock.
We are a Delaware corporation and the anti-takeover provisions of the Delaware General Corporation Law may
discourage, delay or prevent a change in control by prohibiting us from engaging in a business combination with an interested
stockholder for a period of three years after the person becomes an interested stockholder, even if a change of control would be
beneficial to our existing stockholders. In addition, our amended and restated certificate of incorporation and bylaws and credit
agreements may discourage, delay or prevent a change in our management or control over us that stockholders may consider
favorable. Our amended and restated certificate of incorporation and bylaws:
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authorize the issuance of “blank check” preferred stock that could be issued by our board of directors to thwart a
takeover attempt;
prohibit cumulative voting in the election of directors, which would otherwise allow holders of less than a majority of
the stock to elect some directors;
establish a classified board of directors as a result of which successor to a director whose term has expired will be
elected to serve from the time of election and qualification until the third annual meeting following election;
require that directors only be removed from office for cause;
provide that vacancies on the board of directors, including newly created directorships, may be filled only by a
majority vote of directors then in office;
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limit who may call special meetings of stockholders;
prohibit stockholder action by written consent, requiring all actions to be taken at a stockholder meeting; and
establish advance notice requirements for nominating candidates for election to the board of directors or for proposing
matters that can be acted upon by stockholders at stockholder meetings.
The affirmative vote of the holders of at least two-thirds of all of the then outstanding shares of our capital stock is
generally necessary to amend or repeal the above provisions that are contained in our amended and restated certificate of
incorporation. Also, absent approval of our board of directors, our amended and restated by-laws may only be amended or
repealed by the affirmative vote of the holders of a majority of our shares of capital stock entitled to vote. In addition, we are
subject to the provisions of Section 203 of the Delaware General Corporation Law, which limits business combination
transactions with stockholders of 15% or more of our outstanding voting stock that our board of directors has not approved.
These provisions and other similar provisions make it more difficult for stockholders or potential acquirers to acquire us. These
provisions may apply even if some stockholders may consider the transaction beneficial to them. As a result, these provisions
could limit the price that investors are willing to pay in the future for shares of our common stock. These provisions might also
discourage a potential acquisition proposal or tender offer, even if the acquisition proposal or tender offer is at a premium over
the then current market price for our common stock.
We have incurred (and expect to continue to incur) significant costs in connection with the restatement of previously issued
consolidated financial statements.
We have incurred significant expenses, including audit, legal, consulting and other professional fees, and lender and
noteholder consent fees, in connection with certain financial transactions that we effected in 2015 and 2016 and our disclosure
of and accounting for such transactions, which we restated in the third quarter of 2018 in our restated annual and quarterly
financial statements for 2015 and 2016. That restatement followed our announcement on June 13, 2017 (the “June 2017
Announcement”), that certain of our prior financial statements would need to be restated. On June 7, 2022, the SEC approved
the Offer of Settlement and filed an Order Instituting Cease-And-Desist Proceedings pursuant to Section 21C of the Securities
Exchange Act of 1934, Making Findings, and Imposing a Cease-And-Desist Order (the “SEC Order”). Pursuant to the terms of
the SEC Order, we consented to pay a civil penalty in the amount of $12.5 million in equal quarterly installments over two
years and to cease and desist from committing or causing any violations of Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B)
of the Exchange Act and the associated rules thereunder. These quarterly settlement payments will divert cash resources and
could adversely impact our business, results of operations and financial condition. Also on June 7, 2022, the SEC filed a civil
action against two former members of our management team, alleging misconduct arising out of the restated transactions that
took place in 2015 and 2016 investigated by the SEC as set forth above. We may be required to indemnify the former members
of management in that action. Due to the inherent uncertainty of litigation, we cannot predict the outcome of the litigation and
can give no assurance that the asserted claims will not have a material adverse effect on its financial position, prospects, or
results of operations. In addition, failure to comply with the provisions of the SEC Order could result in further actions by one
or both governmental agencies which could have a material adverse effect on our results of operations.
Our current or future debt securities or preferred equity securities, which are and would be senior to our common stock,
may adversely affect the market price of our common stock.
Our Senior Notes and Series B Preferred Stock are senior to our common stock. In addition, in the future, we may attempt
to increase our capital resources by offering debt or preferred equity securities, including medium term notes, senior or
subordinated notes and classes of preferred stock. Debt securities or shares of preferred stock will generally be entitled to
receive interest payments or distributions, both current and in connection with any liquidation or sale, prior to the holders of our
common stock. We are not required to offer any such additional debt or preferred equity securities to existing common
stockholders on a preemptive basis, and we may generally issue any such debt or preferred equity securities in the future
without obtaining the consent of our common stockholders. As a result, any such future offerings of debt securities or preferred
equity securities may adversely affect the market price of the common stock.
B. Riley Financial, Inc. and its affiliates (“BRF”) have significant influence over us and may have conflicts of interest that
arise out of future contractual relationships it or its affiliates may have with us.
As of December 31, 2023 BRF owned 13.7% of our outstanding common stock and all of our Series B Preferred Stock. As
a result, BRF holds significant influence over us as a significant shareholder and may have conflicts of interest that arise out of
current or future contractual relationships it or its affiliates may have with us. In addition, for so long as BRF and its affiliates
beneficially own at least 10% of our outstanding common stock, BRF will have the right to nominate one member of our board
of directors pursuant to an investor rights agreement.
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As a result of the foregoing arrangements, BRF has significant influence over our management and policies and over all
matters requiring shareholder approval, including the election of directors, amendment of our certificate of incorporation and
approval of significant corporate transactions. Further, if BRF and other significant shareholders of the Company were to act
together on any matter presented for shareholder approval, they could have the ability to control the outcome of that matter.
BRF can take actions that have the effect of delaying or preventing a change of control of us or discouraging others from
making tender offers for our shares, which could prevent shareholders from receiving a premium for their shares. These actions
may be taken even if other shareholders oppose them.
The Senior Notes are unsecured and therefore are effectively subordinated to any secured indebtedness that we currently
have or that we may incur in the future.
The Senior Notes are not secured by any of our assets or any of the assets of our subsidiaries. As a result, the Senior Notes
are effectively subordinated to any secured indebtedness that we or our subsidiaries have currently outstanding or may incur in
the future (or any indebtedness that is initially unsecured to which we subsequently grant security) to the extent of the value of
the assets securing such indebtedness. The indenture governing the Senior Notes does not prohibit us or our subsidiaries from
incurring additional secured (or unsecured) indebtedness in the future. In any liquidation, dissolution, bankruptcy or other
similar proceeding, the holders of any of our existing or future secured indebtedness and the secured indebtedness of our
subsidiaries may assert rights against the assets pledged to secure that indebtedness and may consequently receive payment
from these assets before they may be used to pay other creditors, including the holders of the Senior Notes.
The Senior Notes are structurally subordinated to the indebtedness and other liabilities of our subsidiaries.
The Senior Notes are obligations exclusively of Synchronoss Technologies, Inc. and not of any of our subsidiaries. None of
our subsidiaries is a guarantor of the Senior Notes, and the Senior Notes are not required to be guaranteed by any subsidiaries
we may acquire or create in the future. Therefore, in any bankruptcy, liquidation or similar proceeding, all claims of creditors
(including trade creditors) of our subsidiaries will have priority over our equity interests in such subsidiaries (and therefore the
claims of our creditors, including holders of the Senior Notes) with respect to the assets of such subsidiaries. Even if we are
recognized as a creditor of one or more of our subsidiaries, our claims would still be effectively subordinated to any security
interests in the assets of any such subsidiary and to any indebtedness or other liabilities of any such subsidiary senior to our
claims. Consequently, the Senior Notes are structurally subordinated to all indebtedness and other liabilities (including trade
payables) of any of our subsidiaries and any subsidiaries that we may in the future acquire or establish as financing vehicles or
otherwise. The indenture governing the Senior Notes does not prohibit us or our subsidiaries from incurring additional
indebtedness in the future. In addition, future debt and security agreements entered into by our subsidiaries may contain various
restrictions, including restrictions on payments by our subsidiaries to us and the transfer by our subsidiaries of assets pledged as
collateral.
The indenture under which the Senior Notes were issued contains limited protection for holders of the Senior Notes.
The indenture under which the Senior Notes were issued offers limited protection to holders of the Senior Notes. The terms
of the indenture and the Senior Notes does not restrict our or any of our subsidiaries’ ability to engage in, or otherwise be a
party to, a variety of corporate transactions, circumstances or events that could have an adverse impact on our investment in the
Senior Notes. In particular, the terms of the indenture and the Senior Notes do not place any restrictions on our or our
subsidiaries’ ability to:
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issue debt securities or otherwise incur additional indebtedness or other obligations, including (1) any indebtedness or
other obligations that would be equal in right of payment to the Senior Notes, (2) any indebtedness or other obligations
that would be secured and therefore rank effectively senior in right of payment to the Senior Notes to the extent of the
values of the assets securing such debt, (3) indebtedness of ours that is guaranteed by one or more of our subsidiaries
and which therefore is structurally senior to the Senior Notes and (4) securities, indebtedness or obligations issued or
incurred by our subsidiaries that would be senior to our equity interests in our subsidiaries and therefore rank
structurally senior to the Senior Notes with respect to the assets of our subsidiaries;
pay dividends on, or purchase or redeem or make any payments in respect of, capital stock or other securities
subordinated in right of payment to the Senior Notes;
sell assets (other than certain limited restrictions on our ability to consolidate, merge or sell all or substantially all of
our assets);
enter into transactions with affiliates;
create liens (including liens on the shares of our subsidiaries) or enter into sale and leaseback transactions;
•
•
• make investments; or
•
create restrictions on the payment of dividends or other amounts to us from our subsidiaries.
37
In addition, the indenture does not include any protection against certain events, such as a change of control, a leveraged
recapitalization or “going private” transaction (which may result in a significant increase of our indebtedness levels),
restructuring or similar transactions. Furthermore, the terms of the indenture and the Senior Notes will not protect holders of the
Senior Notes in the event that we experience changes (including significant adverse changes) in our financial condition, results
of operations or credit ratings, as they do not require that we or our subsidiaries adhere to any financial tests or ratios or
specified levels of net worth, revenues, income, cash flow, or liquidity. Also, an event of default or acceleration under our other
indebtedness would not necessarily result in an Event of Default under the Senior Notes.
Our ability to recapitalize, incur additional debt and take a number of other actions that are not limited by the terms of the
Senior Notes may have important consequences for you as a holder of the Senior Notes, including making it more difficult for
us to satisfy our obligations with respect to the Senior Notes or negatively affecting the trading value of the Senior Notes.
Other debt we issue or incur in the future could contain more protections for its holders than the indenture and the Senior
Notes, including additional covenants and events of default. The issuance or incurrence of any such debt with incremental
protections could affect the market for and trading levels and prices of the Senior Notes.
An increase in market interest rates could result in a decrease in the value of the Senior Notes.
In general, as market interest rates rise, notes bearing interest at a fixed rate decline in value. We cannot predict the future
level of market interest rates.
An active trading market for the Senior Notes may not develop, which could limit the market price of the Senior Notes or
your ability to sell them.
The Senior Notes are listed on Nasdaq under the symbol “SNCRL”. We cannot provide any assurances that an active
trading market will develop for the Senior Notes or that holders of our Senior Notes will be able to sell their Notes. If the Senior
Notes are traded after their initial issuance, they may trade at a discount from their initial offering price depending on prevailing
interest rates, the market for similar securities, our credit ratings, general economic conditions, our financial condition,
performance and prospects and other factors. The underwriters of our Senior Note offering have advised us that they may make
a market in the Senior Notes, but they are not obligated to do so. The underwriters may discontinue any market-making in the
Senior Notes at any time at their sole discretion. Accordingly, we cannot assure you that a liquid trading market will develop
for the Senior Notes, that holders of our Senior Notes will be able to sell their Senior Notes at a particular time or that the price
the holders receive when they sell will be favorable. To the extent an active trading market does not develop, the liquidity and
trading price for the Senior Notes may be harmed. Accordingly, holders of our Senior Notes may be required to bear the
financial risk of an investment in the Senior Notes for an indefinite period of time.
In addition, there may be a limited number of buyers when a holder decides to sell their Senior Notes. This may affect the
price, if any, offered for such notes or the holders’ ability to sell them when desired or at all.
We may issue additional Senior Notes.
Under the terms of the indenture governing the Senior Notes, we may from time to time without notice to, or the consent
of, the holders of the Senior Notes, create and issue additional notes which will be equal in rank to the Senior Notes. On
October 25, 2021, we entered into an At Market Issuance Sales Agreement (the “Sales Agreement”) between us and BRF,
which provides that we may from time to time issue and sell, by means of “at the market” offerings, up to $18 million of our
Senior Notes. We will not issue any such additional Notes unless such issuance would constitute a “qualified reopening” for
U.S. federal income tax purposes.
The rating for the Senior Notes could at any time be revised downward or withdrawn entirely at the discretion of the issuing
rating agency.
We have obtained a rating for the Senior Notes. Ratings only reflect the views of the issuing rating agency or agencies and
such ratings could at any time be revised downward or withdrawn entirely at the discretion of the issuing rating agency. A
rating is not a recommendation to purchase, sell or hold the Senior Notes. Ratings do not reflect market prices or suitability of a
security for a particular investor and the rating of the Senior Notes may not reflect all risks related to us and our business, or the
structure or market value of the Senior Notes. We may elect to issue other securities for which we may seek to obtain a rating in
the future. If we issue other securities with a rating, such ratings, if they are lower than market expectations or are subsequently
lowered or withdrawn, could adversely affect the market for or the market value of the Senior Notes.
38
A 1% U.S. federal excise tax may be imposed upon us in connection with the redemptions by us of our Series B Non-
Convertible Perpetual Preferred Stock (“Series B Preferred Stock”) or other redemptions or repurchases of our equity.
On August 16, 2022, President Biden signed into law the IRA, which, among other things, imposes a new U.S. federal 1%
excise tax on certain repurchases (including redemptions) of stock by publicly traded domestic corporations and certain
domestic subsidiaries of publicly traded foreign corporations. This excise tax is imposed on the repurchasing corporation itself,
not its stockholders from which shares are repurchased. Generally, the amount of the excise tax is 1% of the fair market value
of the shares repurchased at the time of the repurchase. For the purposes of calculating the excise tax, the repurchasing
corporation is permitted to net the fair market value of certain new stock issuances against the fair market value of the stock
repurchases that occur in the same taxable year. On December 27, 2022, the U.S. Treasury Department issued a notice that
provides interim guidance regarding the application of the 1% excise tax pending forthcoming proposed regulations. The IRA
excise tax applies to repurchases and redemptions that occur after December 31, 2022.
Pursuant to the Certificate of Designation setting forth the rights, preferences, privileges, qualifications, restrictions and
limitations on the Series B Preferred Stock (the “Series B Certificate”), each share of Series B Preferred Stock will be
redeemable at the option of the holder upon the occurrence of a “Fundamental Change” (i) for cash at a price per share equal to
the Liquidation Preference (as defined in the Series B Certificate) and the accrued but unpaid dividends or (ii) for 1.5 times par
in the case of payment in shares of common stock, subject to certain limitations on the amount of stock that could be issued to
the holders of Series B Preferred Stock. In addition, we are permitted to redeem outstanding shares of the Series B Preferred
Stock at any time for the sum of the then-applicable Liquidation Preference and the accrued but unpaid dividends. Pursuant to
the Series B Certificate, we will be required to use (i) the first $50.0 million of proceeds from certain transactions (i.e.,
disposition, sale of assets, tax refunds) received by the Company to redeem for cash, shares of the Series B Preferred Stock, on
a pro rata basis among each holder of Series B Preferred Stock and (ii) the next $25.0 million of proceeds from certain
transactions received by us may be used by us to buy back shares of common stock and to the extent, not used for such purpose,
to redeem, for cash, shares of the Series B Preferred Stock, on a pro rata basis among each holder of the Series B Preferred
Stock.
We expect that each redemption of Series B Preferred Stock after December 31, 2022 will be subject to the 1% excise tax.
Whether and to what extent we would be subject to the excise tax would depend on a number of factors, including (i) the fair
market value of the redemptions and repurchase, (ii) the nature and amount of any equity issuances within the same taxable year
and (iii) the regulations and other guidance issued by the U.S. Treasury Department and the IRS. For example, on November 3,
2023, we repurchased shares of our outstanding Series B Preferred Stock, pursuant to the Series B Certificate, which, for the
purposes of calculating the excise tax, were offset by the fair market value of new stock issuances in the same taxable year. The
1% excise tax may increase our costs and impact our operations. This could have an adverse effect on our margins and financial
position and would negatively affect our revenues and results of operations and/or trading price of our common stock.
Our acquisitions, divestitures and other strategic transactions may not produce anticipated results, which could have a
material adverse effect on our business, financial condition or results of operations.
We have made and expect to continue to make acquisitions, divestitures and other strategic transactions to strengthen our
business and grow our Company. For example, on November 1, 2023, we announced that we entered into an Asset Purchase
Agreement with Lumine Group Software Solutions (Ireland) Limited, a private limited company incorporated under the laws of
Ireland, and sold certain assets related to our Messaging Solutions and Digital Solutions business units for up to an aggregate of
$41.8 million in cash, subject to customary purchase price adjustments (the “November 2023 Divestiture”). Such transactions
present significant challenges and risks, as the market for acquisitions, divestitures and other strategic transactions is highly
competitive, especially in light of industry consolidation, which may affect our ability to complete such transactions.
If we are unsuccessful in completing such transactions or if such opportunities for expansion do not arise, our business,
financial condition or results of operations could be materially adversely affected.
If such transactions are completed, the anticipated growth and other strategic objectives of such transactions may not be
fully realized or may take longer to realize than expected, and a variety of factors may adversely affect any anticipated benefits
from such transactions. Our acquisitions, divestitures and other strategic transactions face difficulties, including, but not limited
to, the following:
•
•
•
the process of integration being more expensive or requiring more resources than anticipated;
a transaction changing the composition of our markets and product mix, and difficulty gaining the skills necessary for
such markets or products;
delays or difficulties continuing to implement our cloud-first strategy, including industry and financial analysts not
understanding the changes to our business model, resulting in changes in financial estimates or failure to meet investor
expectations;
39
•
•
•
•
•
•
•
•
•
•
•
delays or difficulties consolidating corporate and administrative infrastructures and eliminating duplicative operations,
including issues in integrating financial reporting, information technology infrastructure, data and content management
systems and product platforms, communications and other systems;
delays or difficulties harmonizing corporate cultures, operating practices, management philosophies, employee
development and compensation programs, internal controls, compliance programs and other policies, procedures and
processes;
assuming unintended liabilities;
unexpected regulatory and operating difficulties and expenditures;
failure to maintain employee morale or retain key personnel of the current or acquired business;
failure to retain existing business and operational relationships;
difficulty coordinating geographically separate organizations, including consolidating offices;
the impact of divestitures on our revenue growth being larger than projected due to greater dis-synergies or adverse
effects on our overall product offerings than expected;
divestitures requiring continued financial involvement in the divested business through continuing equity ownership,
guarantees, indemnities or other financial obligations;
incurring impairment charges or other losses related to divestitures; and
diversion of management’s focus from other business operations.
Moreover, we may face regulatory challenges that impact our ability to conduct due diligence. There can be no assurance
that future discoveries will not have a material adverse effect on our ability to realize the cost or revenue synergies or other
benefits we expect from the November 2023 Divestiture. The failure of acquisitions, divestitures and other strategic transactions
to perform as expected could have a material adverse effect on our business, financial condition or results of operations. With
any divestiture, there are risks that future operating results could be unfavorably impacted if targeted objectives, such as cost
savings or earn-out payments or other contingent payments associated with the financial performance of the divested business,
are not achieved or if other business disruptions occur as a result of the divestiture or activities related to the divestiture.
Our employee retention and hiring may be adversely impacted by immigration restrictions and related factors.
Competition for skilled personnel is intense in our industry and any failure on our part to hire and retain appropriately
skilled employees could harm our business. Our ability to hire and retain skilled employees is impacted, at least in part, by the
fact that a portion of our professional workforce in the United States is comprised of foreign nationals who are not United
States citizens. In order to be legally allowed to work for us, these individuals generally hold immigrant visas (which may or
may not be tied to their employment with us) or green cards, the latter of which makes them permanent residents in the United
States. The ability of these foreign nationals to remain and work in the United States is impacted by a variety of laws and
regulations, as well as the processing procedures of various government agencies. Changes in applicable laws, regulations or
procedures could adversely affect our ability to hire or retain these skilled employees and could affect our costs of doing
business and our ability to deliver services to our customers. In addition, if the laws, rules or procedures governing the ability of
foreign nationals to work in the United States were to change or if the number of visas available for foreign nationals permitted
to work in the United States were to be reduced, our business could be adversely affected, if, for example, we were unable to
hire or no longer able to retain a skilled worker who is a foreign national. Employing foreign nationals may require significant
time and expense and our foreign national employees may choose to leave after we have made this investment. While a foreign
national who is working under an immigrant visa tied to his or her employment by us may be less likely to choose to leave our
Company than a similarly situated employee who is a United States national or a green card holder (as leaving our employ
could mean also having to leave the United States), this may not always be the case. Additionally, many of our foreign national
employees hold green cards, which means that they have greater flexibility to leave our Company without facing the risk of also
having to leave the United States.
We maintain our cash at financial institutions, often in balances that exceed federally-insured limits. Adverse developments
affecting financial institutions, companies in the financial services industry or the financial services industry generally,
such as actual events or concerns involving liquidity, defaults or non-performance, could adversely affect our operations
and liquidity.
Actual events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial
institutions or other companies in the financial services industry or the financial services industry generally, or concerns or
rumors about any events of these kinds, have in the past and may in the future lead to market-wide liquidity problems. Our cash
in the U.S. is held in accounts at U.S. banking institutions that we believe are of high quality, and some of our cash is held in
accounts outside the U.S. Cash held in depository accounts may exceed the $250,000 Federal Deposit Insurance Corporation
insurance limits, or similar governmental deposit insurance outside the U.S. If such banking institutions were to fail, we could
lose all or a portion of those amounts held in excess of such insurance limits. Increasing concerns regarding the U.S. or
international financial systems, including bank failures and bailouts, and their potential broader effects and potential systemic
40
risk on the banking sector generally, may adversely affect our access to capital. Any decline in available funding or access to
our cash and liquidity resources could, among other risks, limit our ability to meet our capital needs and fund future growth or
fulfill our other obligations, or result in breaches of our financial and/or contractual obligations. Any of these impacts, or any
other impacts resulting from the factors described above or other related or similar factors not described above, could have
material adverse impacts on our business, financial condition and results of operations.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 1C. CYBERSECURITY
All companies utilizing technology are subject to threats of breaches of their cybersecurity programs. To mitigate the
threat to our business and address regulatory requirements, we take a comprehensive approach to cybersecurity risk
management and have developed and implemented a cybersecurity risk management program intended to protect the
confidentiality, integrity, and availability of our critical systems and information. We continue to make significant investments
to augment the capabilities of our people, process, and technologies in order to address our cybersecurity risks. Our
cybersecurity risks, and the controls designed to mitigate those risks, are integrated into our overall risk management
governance within our Global Information Security (GIS) organization. Pursuant to our current policies an update on the
operations of the cybersecurity program and the risks and trends in cybersecurity are reviewed, at a minimum, annually by our
Board of Directors and periodically by the Audit Committee of our Board of Directors (Audit Committee).
Risk Management and Strategy
We have implemented a systematic approach to managing our cybersecurity risks and have adopted a comprehensive set of
cybersecurity policies that include best practices based on recognized industry standards and guidelines. These policies provide
guidance on roles and responsibilities of key stakeholders and promote awareness. These policies also cover cyber education
and training as well as help us to align with applicable laws and regulations to meet our compliance requirements. The primary
responsibility for assessing, monitoring and managing our cybersecurity risks rests with our Chief Information Security Officer
(CISO) within our GIS organization, who reports to our Chief Technology Officer. The CISO is also responsible for managing
the risk assessment and mitigation process. Our CISO has over 13 years of experience serving in various roles in risk
management as well as enterprise and cyber security, including serving as the project lead and founder of the Open Worldwide
Application Security Project (OWASP) flagship project Security Shepherd, a web and mobile application security training
program, and leading IBM’s ethical hacking team. He was also a principal security engineer at Axway prior to joining
Synchronoss where he served as product security architect and a director of product security prior to accepting the role as our
CISO. Our Chief Technology Officer has over 20 years of experience in the telecommunications industry, including serving as
our Chief Architect and Senior Software Engineer, during which he oversaw our GIS program, including the governance, risk
and compliance management related thereto. We also engage consultants, and other service providers, to help us implement our
cybersecurity policies and procedures. These service providers assist us with monitoring security threats and vulnerabilities as
well as responding to identified cybersecurity incidents, including prompt escalation and timely communication of major
security incidents to senior business leadership and the Audit Committee.
As part of our cybersecurity policies, we conduct risk assessments designed to identify and prioritize potential
cybersecurity threats, assess the likelihood and impact of those threats, and develop strategies for mitigating or managing
cybersecurity risks. This involves assessing, evaluating and monitoring our vulnerabilities, as well as conducting impact
analysis. Additionally, we provide ongoing cybersecurity awareness training to educate employees about the potential
cybersecurity threats and how employees can identify potential threats and protect our data.
We have an Information Security Third Party Risk Management Policy, as well as a Vendor Code of Conduct, which
contractually requires each third-party service provider accessing our or our customers’ information systems to comply with our
information security policies, as well as to meet a minimum set of information security and data privacy and protection
standards in connection with their delivery of products and/or services to us. We also engage a third-party service provider to
assess our third-party suppliers for potential risks and effectiveness of controls related to information security and data privacy
protection that are relevant in the context of their delivery of services.
Governance
Our CISO and GIS team meets regularly with our IT and cybersecurity service providers and internal teams, such as the
Risk Advisory Board (RAB), about the Company’s ongoing compliance and risk management. GIS also drives business
continuity and crisis management through coordinating and communicating with all levels of an organization and seeks to
41
ensure that trends and emerging issues that could impact the business are considered and communicated as appropriate.
Pursuant to our current policies the GIS team also provides, at the minimum, annual briefings to our Board of Directors and
periodic briefings to the Audit Committee regarding our cybersecurity risks and activities, including any recent cybersecurity
incidents and related responses, cybersecurity systems testing, activities of third parties, among other relevant topics. The RAB
convenes periodically or as needed to review the cybersecurity risks in the business. The RAB consists of individuals from GIS
as well as the Chief Technology Officer.
Cybersecurity Threat Disclosure
There can be no guarantee that our policies and procedures will be properly followed in every instance or that those
policies and procedures will be effective. Although our “Risk Factors” in Item 1A include further detail about the material
cybersecurity risks we face, we are not aware of any cybersecurity threats that have materially affected our business to date. We
can provide no assurance that there will not be incidents in the future or that they will not materially affect us, including our
business strategy, results of operations, or financial condition.
ITEM 2. PROPERTIES
We lease approximately 120,000 square feet of office space for our corporate headquarters in Bridgewater, New Jersey. We
have other leases in certain countries including India, Ireland, and in various states in the United States including Arizona and
Pennsylvania. The lease terms for our locations expire in the years between 2024 and 2028. We believe that the facilities we
now lease are sufficient to meet our needs through at least the next twelve months.
ITEM 3. LEGAL PROCEEDINGS
For a discussion of our material pending legal proceedings that could impact our results of operations, financial condition
or cash flows see Note 22. Legal Matters of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K.
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable.
42
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
Market Information
As of December 31, 2023, our common stock was traded and listed on The Nasdaq Global Select Market under the symbol
“SNCR.”
As of December 31, 2023, there were approximately 52 named holders of record of our common stock as according to our
transfer agent. The actual number of stockholders is greater than this number of record holders, and includes stockholders who
are beneficial owners, but whose shares are held in street name by banks, brokers and other nominees. On December 31, 2023,
the last reported sale price of our common stock as reported on The Nasdaq Global Select Market was $6.21 per share.
Dividend Policy
Common Stock
We have never declared or paid cash dividends on our common equity. We do not anticipate paying any cash dividends in
the foreseeable future. Any future determination to declare cash dividends will be made at the discretion of our Board of
Directors and will depend on our financial condition, results of operations, capital requirements, general business conditions
and other factors that our Board of Directors may deem relevant.
Preferred Stock
Series B Non-Convertible Preferred Stock
On June 30, 2021, the Company closed a private placement of 75,000 shares of its Series B Perpetual Non-Convertible
Preferred Stock, par value $0.0001 per share, with an initial liquidation preference of $1,000 per share (the “Series B Preferred
Stock”), for net proceeds of $72.8 million (the “Series B Transaction”). The sale of the Series B Preferred Stock was pursuant
to the Series B Preferred Stock Purchase Agreement, dated as of June 24, 2021 (the “Series B Purchase Agreement”), between
the Company and B. Riley Principal Investments, LLC (“BRPI”).
The rights, preferences, privileges, qualifications, restrictions and limitations of the shares of Series B Preferred Stock are
set forth in the Series B Certificate. Under the Series B Certificate, the holders of the Series B Preferred Stock are entitled to
receive, on each share of Series B Preferred Stock on a quarterly basis, an amount equal to the dividend rate, as described in the
following sentence, divided by four and multiplied by the then-applicable Liquidation Preference per share of Series B
Preferred Stock (collectively, the “Preferred Dividends”). The dividend rate is (1) 9.5% per annum for the period commencing
on June 30, 2021 and ending on and including December 31, 2021, (2) 13% per annum for the year commencing on January 1,
2022 and ending on and including December 31, 2022; and (3) 14% per annum for the year commencing on January 1, 2023
and thereafter. The Preferred Dividends will be due in cash on January 1, April 1, July 1 and October 1 of each year (each, a
“Series B Dividend Payment Date”). The Company may choose to pay the Series B preferred dividends in cash or in additional
shares of Series B Preferred Stock. In the event the Company does not declare and pay a dividend in cash on any Series B
Dividend Payment Date, the unpaid amount of the Preferred Dividend will be added to the Liquidation Preference. As of
December 31, 2023, the Liquidation Value and Redemption Value of the Series B Preferred Shares was $63.0 million.
The Company paid the following Series B preferred dividends and principal during the year ended December 31, 2023 and
accrued the following preferred dividends as of December 31, 2023:
paid $9.8 million preferred dividends in cash;
•
• made a $9.9 million principal payment to redeem 9,874 shares of Series B Preferred stock;
•
accrued $2.3 million preferred dividend which was paid in cash on January 3, 2023.
Series A Convertible Preferred Stock
On February 15, 2018, the Company issued to Silver Private Holdings I, LLC (“Silver”), an affiliate of Siris Capital Group,
LLC (“Siris”) 185,000 shares of our newly issued Series A Preferred Stock, par value $0.0001 per share. Under the Series A
43
Certificate, the holders of the Series A Preferred Stock were entitled to receive, on each share of Series A Preferred Stock on a
quarterly basis, an amount equal to the dividend rate of 14.5% divided by four and multiplied by the then-applicable
Liquidation Preference (as defined in the Series A Certificate) per share of Series A Preferred Stock (collectively, the “Preferred
Dividends”). The Preferred Dividends were due on January 1, April 1, July 1 and October 1 of each year (each, a “Series A
Dividend Payment Date”). The Company may choose to pay the Preferred Dividends in cash or in additional shares of Series A
Preferred Stock.
Redemption of Series A Preferred Stock
The Company redeemed in full all of the 268,917 outstanding shares of the Series A Preferred Stock for an aggregate
redemption price of $278.7 million and all rights under the Investor Rights Agreement relating to the Series A Preferred Stock
were terminated effective with the Redemption. No Series A Preferred Stock remains outstanding or authorized as of December
31, 2023.
For a discussion of our stockholder’s equity refer to Note 15. Capital Structure of the Notes to Consolidated Financial
Statements in Part II, Item 8 of this Form 10-K.
Information concerning securities authorized for issuance under equity compensation plans is set forth under the heading
“Securities Authorized for Issuance Under Equity Compensation Plans” in the Synchronoss Proxy Statement for the 2022
Annual Meeting of Stockholders and is incorporated herein by reference.
44
Stock Performance Graph
The graph set forth below compares the cumulative total stockholder return on our common stock between December 31,
2018 and December 31, 2023, with the cumulative total return of (i) the Nasdaq Computer Index and (ii) the Nasdaq Composite
Index, over the same period. This graph assumes the investment of $100 on December 31, 2018 in our common stock, the
Nasdaq Computer Index and the Nasdaq Composite Index, and assumes the reinvestment of dividends, if any. The graph
assumes the initial value of our common stock on December 31, 2018 was the closing sales price of $55.26 per share.
The comparisons shown in the graph below are based upon historical data. We caution that the stock price performance
shown in the graph below is not necessarily indicative of, nor is it intended to forecast, the potential future performance of our
common stock.
Information used in the graph was obtained from Nasdaq, a source believed to be reliable, but we are not responsible for
any errors or omissions in such information.
Synchronoss Technologies, Inc.
Nasdaq Composite Index
Nasdaq Computer Index
December
31, 2018
December
31, 2019
December
31, 2020
December
31, 2021
December
31, 2022
December
31, 2023
$100
$100
$100
$77
$135
$150
$77
$194
$225
$40
$236
$311
$10
$158
$200
$11
$226
$332
45
DOLLARSSynchronoss Technologies, Inc.Nasdaq Composite IndexNasdaq Computer IndexDecember 31, 2018December 31, 2019December 31, 2020December 31, 2021December 31, 2022December 31, 2023020406080100120140160180200220240260280300320340360 ITEM 6. [Reserved]
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to
provide a reader of our financial statements with a narrative from the perspective of our management on our financial
condition, results of operations, liquidity and certain other factors that may affect our future results. The MD&A should be read
in conjunction with the Financial Statements and Notes to the consolidated financial statements. This section of this Form 10-K
generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022. Discussions of 2022 items and
year-to-year comparisons between 2022 and 2021 are not included in this Form 10-K, and can be found in “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report
on Form 10-K for the fiscal year ended December 31, 2022.
Revenues
We generate most of our revenues on a subscription basis, which is derived from contracts that extend up to 48 months
from execution.
The future success of our business depends on the continued growth of Business-to-Business and Business-to-Business-to-
Consumer driving customer transactions, and continued expansion of our platforms into the TMT market globally through
cloud markets. As such, the volume of subscribers and our ability to expand our footprint in TMT and globally may result in
revenue fluctuations on a quarterly basis.
Most of our revenues are recorded in U.S. dollars but as we continue to expand our footprint with international carriers, we
are subject to currency translation that could affect our future net sales as reported in U.S. dollars.
The Company’s top five customers accounted for 96.6%, 94.6% and 92.4% of net revenues for the years ended December
31, 2023, 2022 and 2021, respectively. Contracts with these customers typically run for three to five years. Of these customers,
Verizon accounted for more than 10% of the Company’s revenues in 2023, 2022, and 2021; and AT&T accounted for more
than 10% of the Company’s revenues in 2023. The loss of Verizon or AT&T as a customer would have a material negative
impact on our company. However, we believe that the costs incurred and subscriber disruption by Verizon or AT&T to replace
Synchronoss’ solutions would be substantial.
Key Developments
Discontinued Operations
On October 31, 2023, Synchronoss Technologies, Inc. entered into an Asset Purchase Agreement with Lumine Group
Software Solutions (Ireland) Limited, pursuant to which the Company sold its Messaging and NetworkX businesses. This
transaction represents a strategic shift designed to maximize shareholder value and allow the Company to solely focus on
providing cloud-centric solutions. In connection with the sale transaction, the Company determined its Messaging and
NetworkX Businesses qualified for discontinued operations accounting treatment in accordance with ASC 205-20.
Accordingly, the operating results of, and costs to separate the Messaging and NetworkX businesses are reported in Net loss
from discontinued operations, net of taxes in the Consolidated Statements of Operations for all periods presented. In addition,
the related assets and liabilities held prior to the sale are reported as Assets and liabilities of discontinued operations on the
Consolidated Balance Sheets. The notes to the financial statements have been adjusted on a retrospective basis. For additional
information, see Note 4. Divestitures and Discontinued Operations of the Notes to Consolidated Financial Statements in Item 8
of this Form 10-K.
Current Trends Affecting Our Results of Operations
Business from our Synchronoss Personal Cloud™ solution has been driven by the growth in mobile devices globally that
are becoming content rich. As these devices replace other traditional devices like PCs, the ability to securely back up content
from mobile devices, sync it with other devices and share it with family, friends and business associates have become an
essential need and subscriber expectation. Such devices include smartphones, connected cars, personal health and wellness
devices and connected home devices. The need for the content from these devices to be stored in a common cloud is also
expected to drive our business in the longer term.
46
Discussion of the Consolidated Statements of Continuing Operations
The following table presents an overview of our results of operations for the years ended December 31, 2023 and 2022 (in
thousands).
Net revenues
Cost of revenues1
Research and development
Selling, general and administrative
Restructuring charges
Depreciation and amortization
Total costs and expenses
(Loss) income from operations
Year Ended December 31,
2023
2022
2023 vs 2022
$ Change
$
$
164,196 $
42,218
46,565
65,216
4,013
16,830
174,842
(10,646) $
173,756 $
46,500
49,598
61,153
1,443
14,756
173,450
306 $
(9,560)
(4,282)
(3,033)
4,063
2,570
2,074
1,392
(10,952)
________________________________
1
Cost of revenues excludes depreciation and amortization which are shown separately.
Net revenues decreased $9.6 million to $164.2 million for the year ended December 31, 2023, compared to the same
period in 2022. The overall change in revenue was primarily due to the runoff of deferred revenue recognized in the first half of
2022 and revenue recognized from the DXP and Activation assets prior to the divestiture in the prior period. The decrease in
revenue was partially offset by continued cloud subscriber growth and professional services associated with the launch of
SoftBank.
Cost of revenues decreased $4.3 million to $42.2 million for the year ended December 31, 2023, compared to the same
period in 2022. The 2023 decrease was mainly driven by a decrease in revenue and improved gross margins as the Company
continues to optimize our cost structure as we enhance our focus on higher margin cloud products post divestiture.
Research and development expense decreased $3.0 million to $46.6 million for the year ended December 31, 2023,
compared to the same period in 2022. The research and development costs decreased year over year mainly as a result of
continued strategic efforts to streamline our product enhancements and developments.
Selling, general and administrative expense increased $4.1 million to $65.2 million for the year ended December 31,
2023, compared to the same period in 2022. The increase in selling, general and administrative expense is mainly related to the
write-down of the STIN Note receivable of $4.8 million, change in contingent consideration for iQmetrix of $1.5 million, and
non-recurring professional fees.
Restructuring charges were $4.0 million and $1.4 million for the year ended December 31, 2023 and 2022. The
restructuring charges primarily related to employment termination costs as a result of the work-force reductions initiated post
divestiture to reduce operating costs and align our resources with our key strategic priorities.
Depreciation and amortization expense increased $2.1 million for the year ended December 31, 2023. The increase was
primarily attributable to increased amortization of capitalized software as we continue to invest in our cloud technology.
Income tax. The Company recognized approximately $4.7 million in related income tax expense and $0.1 million in
related income tax benefit during the years ended December 31, 2023 and 2022, respectively. The effective tax rate was
approximately (16.2)% for the year ended December 31, 2023, which was lower than the U.S. federal statutory rate primarily
due to the impact of Global Intangible Low-Taxed Income, attributable to income in foreign jurisdictions and the impact of the
U.S. capitalization of research expenses, and the impact of recognizing a deferred tax liability associated with changes in
management’s indefinite reinvestment assertion under APB 23. This decrease was partially offset by loss jurisdictions where
full valuation allowances have been recorded, foreign rate differential and GAAP to statutory adjustments. The Company’s
effective tax rate was approximately 0.9% for the year ended December 31, 2022, which was lower than the U.S. federal
statutory rate primarily due to the impact of Global Intangible Low-Taxed Income, attributable to income in foreign
jurisdictions and the impact of the U.S. capitalization of research expenses, and the divestiture of the DXP and Activation
assets. This decrease was partially offset by loss jurisdictions where full valuation allowances have been recorded and foreign
income tax credits generated in the period.
47
Liquidity and Capital Resources
As of December 31, 2023, our principal sources of liquidity have been cash provided by operations. Our cash and cash
equivalents balance was $24.6 million at December 31, 2023.
At December 31, 2023, our non-U.S. subsidiaries held approximately $8.2 million of cash and cash equivalents that are
available for use by all of our operations around the world.
Our policy has been to leave our cumulative unremitted foreign earnings invested indefinitely outside the United States,
and we intend to continue this policy for most of our foreign subsidiaries. During 2023, we changed our indefinite reinvestment
assertion for our Indian subsidiary and recorded a deferred tax liability associated with the outside basis difference. The
Company continues to assert permanent reinvestment of foreign earnings in all other foreign jurisdictions. Due to the timing
and circumstances of repatriation of such earnings, if any, it is not practicable to determine the unrecognized deferred tax
liability relating to such amounts.
We believe that our cash, cash equivalents, financing sources, and our ability to manage working capital and expected
positive cash flows generated from operations in combination with continued expense reductions will be sufficient to fund our
operations for the next twelve months from the date of filing of this Annual Report on Form 10-K. However, as the current
geopolitical tensions unfold, we will continue to assess any impact on our operations and our liquidity needs. Our liquidity
plans are subject to a number of risks and uncertainties, including those described in the "Forward-Looking Statements" section
of this MD&A and Part I, Item 1A. “Risk Factors”, some of which are outside of our control.
Offering of 2021 Senior Notes due 2026
On June 30, 2021, the Company closed its underwritten public offering of $120.0 million aggregate principal amount of
8.375% senior notes due 2026 at a par value of $25.00 per senior note (the “Senior Notes”). The offering was conducted
pursuant to an underwriting agreement (the “Notes Underwriting Agreement”) dated June 25, 2021, by and among the
Company and B. Riley Securities, Inc., as representative of the several underwriters (the “Notes Underwriters”). At the closing,
the Company issued $125.0 million aggregate principal amount of Senior Notes, inclusive of $5.0 million aggregate principal
amount of Senior Notes issued pursuant to the full exercise of the Notes Underwriters’ option to purchase additional Senior
Notes.
The Senior Notes are senior unsecured obligations of the Company and rank equally in right of payment with all of the
Company’s existing and future senior unsecured and unsubordinated indebtedness. The Senior Notes are effectively
subordinated in right of payment to all of the Company’s existing and future secured indebtedness to the extent of the value of
the assets securing such indebtedness and structurally subordinated to all existing and future indebtedness of the Company’s
subsidiaries, including trade payables. The Senior Notes bear interest at the rate of 8.375% per annum. Interest on the Senior
Notes is payable quarterly in arrears on January 31, April 30, July 31 and October 31 of each year, commencing on July 31,
2021. The Senior Notes will mature on June 30, 2026, unless redeemed prior to maturity.
The Company may, at its option, at any time and from time to time, redeem the Senior Notes for cash in whole or in part (i)
on or after June 30, 2022 and prior to June 30, 2023, at a price equal to $25.75 per Senior Note, plus accrued and unpaid interest
to, but excluding, the date of redemption, (ii) on or after June 30, 2023 and prior to June 30, 2024, at a price equal to $25.50 per
Senior Note, plus accrued and unpaid interest to, but excluding, the date of redemption, (iii) on or after June 30, 2024 and prior
to June 30, 2025, at a price equal to $25.25 per Senior Note, plus accrued and unpaid interest to, but excluding, the date of
redemption, and (iv) on or after June 30, 2025 and prior to maturity, at a price equal to 100% of their principal amount, plus
accrued and unpaid interest to, but excluding, the date of redemption. On and after any redemption date, interest will cease to
accrue on the redeemed Senior Notes.
48
On October 25, 2021, the Company entered into an At Market Issuance Sales Agreement (the “Sales Agreement”) between
the Company and B. Riley Securities, Inc. (the “Agent”), a related party, pursuant to which the Company may offer and sell,
from time to time, up to $18.0 million of the Company’s 8.375% Senior Notes due 2026. Sales of the additional Senior Notes
pursuant to the Sales Agreement, if any, may be made in transactions that are deemed to be “at the market offerings” as defined
in Rule 415 under the Securities Act of 1933, as amended (the “Securities Act”). Under the Sales Agreement, the Agent will be
entitled to compensation of 2.0% of the gross proceeds of all notes sold through it as the Company’s agent.
During the fourth quarter of 2021, the Company sold $16.1 million aggregate principal amount of Senior Notes under the
Sales Agreement. The additional Senior Notes sold have terms identical to the initial Senior Notes and are be fungible and vote
together with the initial Senior Notes immediately upon issuance. The Senior Notes and initial Senior Notes are listed and trade
on The Nasdaq Global Market under the symbol “SNCRL.”
The total fair value of the outstanding Senior Notes was $101.3 million as of December 31, 2023. The Company is in
compliance with its debt covenants as of December 31, 2023.
For further details, see Note 13. Debt of the Notes to Consolidated Financial Statements in Item 8 of this Form 10-K.
2019 Revolving Credit Facility
On October 4, 2019, the Company entered into a Credit Agreement with Citizens Bank, N.A., for a $10.0 million
Revolving Credit Facility. Borrowings under the Revolving Credit Facility bore interest at a rate equal to, at the Company’s
option, either (1) the arithmetic average of the LIBOR rate determined by reference to the costs of funds for U.S. dollar deposits
for the interest period (one, three or six months (or 12 months if agreed to by all applicable Lenders)) as selected by the
Company relevant to such borrowing plus the applicable margin, or (2) a base rate determined by reference to the greatest of the
federal funds rate plus 0.5%, the prime commercial lending rate as determined by the Agent, and the daily LIBOR rate plus
1.0%, in each case plus an applicable margin and subject to a floor of 0.0%.
On June 30, 2021, the Company paid off the outstanding balance and closed the Revolving Credit Facility.
Series B Non-Convertible Preferred Stock
On June 30, 2021, the Company closed a private placement of 75,000 shares of its Series B Perpetual Non-Convertible
Preferred Stock, par value $0.0001 per share, with an initial liquidation preference of $1,000 per share (the “Series B Preferred
Stock”), for net proceeds of $72.8 million (the “Series B Transaction”). The sale of the Series B Preferred Stock was pursuant
to the Series B Preferred Stock Purchase Agreement, dated as of June 24, 2021 (the “Series B Purchase Agreement”), between
the Company and B. Riley Principal Investments, LLC (“BRPI”).
In connection with the closing of the Series B Transaction, the Company (i) filed a Certificate of Designation with the State
of Delaware setting forth the rights, preferences, privileges, qualifications, restrictions and limitations on the Series B Preferred
Stock (the “Series B Certificate”) and (ii) entered into an Investor Rights Agreement with B. Riley Financial, Inc. (“B. Riley
Financial”) and BRPI setting forth certain governance and registration rights of B. Riley Financial with respect to the Company.
Certificate of Designation of the Series B Preferred Stock
The rights, preferences, privileges, qualifications, restrictions and limitations of the shares of Series B Preferred Stock are
set forth in the Series B Certificate. Under the Series B Certificate, the holders of the Series B Preferred Stock are entitled to
receive, on each share of Series B Preferred Stock on a quarterly basis, an amount equal to the dividend rate, as described in the
following sentence, divided by four and multiplied by the then-applicable Liquidation Preference per share of Series B
Preferred Stock (collectively, the “Preferred Dividends”). The dividend rate is (1) 9.5% per annum for the period commencing
on June 30, 2021 and ending on and including December 31, 2021, (2) 13% per annum for the year commencing on January 1,
2022 and ending on and including December 31, 2022; and (3) 14% per annum for the year commencing on January 1, 2023
and thereafter. The Preferred Dividends will be due in cash on January 1, April 1, July 1 and October 1 of each year (each, a
“Series B Dividend Payment Date”). The Company may choose to pay the Series B Preferred Dividends in cash or in additional
shares of Series B Preferred Stock. In the event the Company does not declare and pay a dividend in cash on any Series B
Dividend Payment Date, the unpaid amount of the Preferred Dividend will be added to the Liquidation Preference. As of
December 31, 2023, the Liquidation Value and Redemption Value of the Series B Preferred Shares was $63.0 million.
Each share of Series B Preferred Stock is redeemable at the option of the holder upon the occurrence of a “Fundamental
Change” at (i) par in the case of a payment in cash or (ii) 1.5 times par in the case of payment in shares of Common Stock (such
49
shares being, “Registrable Securities”), subject to certain limitations on the amount of stock that could be issued to the holders
of Series B Stock. In addition, the Company will be permitted to redeem outstanding shares of the Series B Preferred Stock at
any time for the sum of the then-applicable Liquidation Preference and the accrued but unpaid dividends. Pursuant to the Series
B Certificate, the Company will be required to use (i) the first $50.0 million of proceeds from certain transactions (i.e.,
disposition, sale of assets, tax refunds) received by the Company to redeem for cash, shares of the Series B Preferred Stock, on
a pro rata basis among each holder of Series B Preferred Stock and (ii) the next $25.0 million of proceeds from certain
transactions received by the Company may be used by the Company to buy back shares of Common Stock and to the extent, not
used for such purpose by the Company, to redeem, for cash, shares of the Series B Preferred Stock, on a pro rata basis among
each holder of the Series B Preferred Stock.
The Company is required to obtain the prior written consent of the holders holding at least a majority of the outstanding
shares of the Series B Preferred Stock before taking certain actions, including: (i) certain dividends, repayments and
redemptions; (ii) any amendment to the Company’s certificate of incorporation that adversely affects the rights, preferences,
privileges or voting powers of the Series B Preferred Stock; and (iii) issuances of stock ranking senior or equivalent to shares of
the Series B Preferred Stock (including additional shares of the Series B Preferred Stock) in the priority of payment of
dividends or in the distribution of assets upon any liquidation, dissolution or winding up of the Company. Other than with
respect to the foregoing consent rights, the Series B Preferred Stock is non-voting stock.
Investor Rights Agreement
On June 30, 2021, the Company, B. Riley Financial and BRPI entered into an Investor Rights Agreement (the “Investor
Rights Agreement”). Pursuant to the Investor Rights Agreement, for so long as affiliates of B. Riley Financial beneficially own
at least 10% of the outstanding shares of common stock (unless such equity threshold percentage is not met due to dilution from
equity issuances), B. Riley Financial is entitled to nominate one Class II director (the “B. Riley Nominee”) to the Company’s
board of directors (the “Board”), who shall be an employee of B. Riley Financial or its affiliates and is approved by the Board,
such approval not to be unreasonably withheld. For so long as affiliates of B. Riley Financial beneficially own 5% or more but
less than 10% of the outstanding shares of common stock (unless such equity threshold percentage is not met due to dilution
from equity issuances), B. Riley Financial is entitled to certain board observer rights.
Series A Convertible Preferred Stock
In accordance with the terms of the Share Purchase Agreement dated as of October 17, 2017 (the “PIPE Purchase
Agreement”), with Silver Private Holdings I, LLC, an affiliate of Siris (“Silver”), on February 15, 2018, the Company issued to
Silver 185,000 shares of its newly issued Series A Convertible Participating Perpetual Preferred Stock (the “Series A Preferred
Stock”), par value $0.0001 per share, with an initial liquidation preference of $1,000 per share, in exchange for $97.7 million in
cash and the transfer from Silver to the Company of the 666,075 shares of the Company’s common stock held by Silver (the
“Preferred Transaction”). In connection with the issuance of the Series A Preferred Stock, we (i) filed the Series A Certificate
and (ii) entered into an Investor Rights Agreement with Silver setting forth certain registration, governance and preemptive
rights of Silver with respect to us (the “Investor Rights Agreement”). Pursuant to the PIPE Purchase Agreement, at the closing,
we paid to Siris $5.0 million as a reimbursement of Silver’s costs and expenses incurred in connection with the Preferred
Transaction.
Redemption of Series A Preferred Stock
The net proceeds from the common stock public offering, Senior Note offering and the Series B Preferred Stock
Transaction were used in part to fully redeem all outstanding shares of the Company’s Series A Preferred Stock on June 30,
2021 (the “Redemption”). The Company redeemed in full all of the 268,917 outstanding shares of the Series A Preferred Stock
for an aggregate Redemption Price of $278.7 million and all rights under the Investor Rights Agreement relating to the Series A
Preferred Stock were terminated effective with the Redemption. No Series A Preferred Stock remains outstanding or authorized
as of December 31, 2023.
50
Discussion of Cash Flows
A summary of net cash flows follows (in thousands):
Net cash provided by (used in):
Operating activities
Investing activities
Financing activities
Year Ended December 31,
2023
2022
Change
2023 vs 2022
$
$
$
18,829 $
17,359 $
3,800 $
(13,166) $
1,470
16,966
(19,979) $
(13,276) $
(6,703)
Our primary source of cash is receipts from revenue. The primary uses of cash are personnel and related costs,
telecommunications and facility costs related primarily to our cost of revenue and general operating expenses including
professional service fees, consulting fees, building and equipment maintenance and marketing expense.
Cash flows from operating activities for the year ended December 31, 2023 was $18.8 million of cash provided by
operating activities, as compared to $17.4 million of cash provided by operating activities for the same period in 2022. The cash
provided by operating activities for fiscal 2023 and 2022 is mainly driven by continued growth in cloud subscribers, reduced
operating costs, and improved margins as the business focuses on Cloud.
Cash flows from investing activities for the year ended December 31, 2023 was $3.8 million of cash provided by
investing activities, as compared to $13.2 million in cash used by investing activities during the same period in 2022. The cash
provided in the current year was driven by the proceeds from the divestiture of the Messaging and NetworkX businesses, which
was partially offset by increased investment in product development for our Cloud offering and capitalization of associated
labor costs.
Cash flows from financing activities for the year ended December 31, 2023 was $20.0 million of cash used by financing
activities, as compared to $13.3 million of cash used for the same period in 2022, primarily due to principal and dividend
payments associated with the redemption of Series B Preferred Stock in 2023.
Effect of Inflation
Inflationary increases in certain input costs, such as occupancy, labor and benefits, and general administrative costs, have
impacted our business. Management does not believe these impacts have had a material impact on our results of operations
during the 2023, 2022 and 2021. We cannot assure you, however, that we will not be affected by general inflation in the future.
Contractual Obligations
Our contractual obligations consist of office and laptop leases, notes payable and related interest as well as contractual
commitments under third-party hosting, software licenses and maintenance agreements. The following table summarizes our
long-term contractual obligations as of December 31, 2023 (in thousands).
Finance lease obligations
Interest
Operating lease obligations
Purchase obligations1
Senior Note Payable
Total
_____________________________
Payments Due by Period
Total
2024
2025-2027
2028
Thereafter
$
$
1,221 $
32,492
34,205
31,085
141,077
240,080 $
616 $
605 $
11,815
7,970
17,729
20,677
21,959
13,356
—
38,130 $
141,077
197,674 $
— $
—
4,276
—
—
4,276 $
—
—
—
—
—
—
1
Amounts represent obligations associated with colocation agreements and other customer delivery related purchase obligations.
51
Uncertain Tax Positions
Unrecognized tax benefits associated with uncertain tax positions are $4.4 million at December 31, 2023. We are not able
to reasonably estimate when we would make any cash payments required to settle these liabilities, but we do not believe that the
ultimate settlement of our obligations will materially affect our liquidity. We do not expect that the balance of unrecognized tax
benefits will significantly increase or decrease over the next twelve months.
Critical Accounting Policies and Estimates
The discussion and analysis of our financial condition and results of operations are based on our consolidated financial
statements, which have been prepared in accordance with U.S. GAAP. The preparation of these consolidated financial
statements in accordance with U.S. GAAP requires us to utilize accounting policies and make certain estimates and assumptions
that affect the reported amounts of assets and liabilities, the disclosure of contingencies as of the date of the financial statements
and the reported amounts of revenues and expenses during a fiscal period. We have discussed the selection and development of
the critical accounting policies with the Audit Committee, and the Audit Committee has reviewed our related disclosures in this
Form 10-K. Although we believe that our judgments and estimates are appropriate, correct and reasonable under the
circumstances, actual results may differ from those estimates. If actual results or events differ materially from those
contemplated by us in making these estimates, our reported financial condition and results of operations for future periods could
be materially affected. See Part I, “Item 1A. Risk Factors” in this Form 10-K for certain matters bearing risks on our future
results of operations.
We believe the following to be our critical accounting policies because they are important to the portrayal of our
consolidated financial condition and results of operations and they require critical management judgments and estimates about
matters that are uncertain.
Significant accounting policies that we employ are presented in Note 2. Summary of Significant Accounting Policies of
the Notes to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K. There were no significant changes in our
critical accounting policies and estimates discussed in our Form 10-K during the year ended December 31, 2023.
Revenue Recognition and Deferred Revenue
The Company generates revenue from the delivery of a range of products, solutions and services for operators, enterprises,
OEMs and technology providers. We offer services principally on a Transactional or Subscription basis (SaaS) or in the form of
Professional Services or Software Licenses. Revenues are recognized when control of the promised goods or services are
transferred to the Company’s customers, in an amount that reflects the consideration that the Company expects to receive in
exchange for those goods or services. The Company generates all of its revenue from contracts with customers.
Subscription and Transaction revenues consist of revenues derived from the processing of transactions through the
Company’s service platforms, providing enterprise portal management services on a subscription basis and maintenance
agreements on software licenses. The Company generates revenue from Subscription services from monthly active user fees,
software as a service (“SaaS”) fees, hosting and storage fees, and fees for the related maintenance support for those services. In
most cases, the subscription or transaction arrangement is a single performance obligation comprised of a series of distinct
services that are substantially the same and that have the same pattern of transfer (i.e., distinct days of service). The Company
applies the variable consideration allocation exception when the terms of variable payment relate specifically to efforts to
satisfy the performance obligation or the transfer of service based on usage within the corresponding period, under Topic 606
Section 10-25-14(b) – in such situations the revenue booked and the revenue billed for any month are the same. When the
Company does not allocate variable consideration to distinct periods of service or apply the variable consideration allocation
exception, the total estimated transaction price is recognized ratably over the term of the contract, where the level of service
provided to the customer does not vary significantly from one period to another.
Transaction service arrangements include services such as processing equipment orders, new account setup and activation,
number port requests, credit checks and inventory management. Transaction revenues are principally based on a contractual
price per transaction and are recognized based on the number of transactions processed during each reporting period. Revenues
are recorded based on the total number of transactions processed at the applicable price established in the relevant contract.
Many of the Company’s contracts guarantee minimum volume transactions from the customer. In these instances, if the
customer’s total estimated transaction volume for the period is expected to be less than the contractual amount, the Company
records revenues at the minimum guaranteed amount on a straight line based over the period covered by the minimum. Setup
52
fees for transactional service arrangements are deferred until set up activities are completed and recognized on a straight-line
basis over remaining expected customer relationship period. Revenues are presented net of discounts, which are volume level
driven.
In accordance with Topic 606 Section 10-50-20, any credits due to customers, which are generally performance driven and
based upon system availability or response times to incidents, are determined and accounted for in the period in which the
services are provided. The Company recognizes revenues from support and maintenance performance obligations over the
service delivery period.
The Company’s software licenses typically provide for a perpetual or term right to use the Company’s software. The
Company has concluded that in most cases its software license is distinct as the customer can benefit from the software on its
own. Software revenue is typically recognized when the software is delivered to the customer. Contracts that include software
customization or specified upgrades may result in the combination of the customization services with the software license as
one performance obligation. The Company does not have a history of returns, or refunds of its software licenses, however, in
limited instances, the Company may constrain consideration to high-risk customers, until collection is resolved.
The Company’s professional services include software development and customization. The contracts generally include
project deliverables specified by each customer. The performance obligations in the agreements are generally combined into
one deliverable and generally result in the transfer of control over time. The underlying deliverable is owned and controlled by
the customer and does not create an asset with an alternative use to us. The Company recognizes revenue on fixed fee contracts
on the proportion of labor hours expended to the total hours expected to complete the contract performance obligation, or
ratably to the extent the level of effort to satisfy the performance obligation is materially consistent each period.
Most of the Company’s contracts with customers contain multiple performance obligations which generally include either
1) a perpetual software license with support and maintenance and sometimes a hosting agreement or 2) a term SaaS agreement,
frequently sold along with professional services. For these contracts, the Company accounts for individual goods and services
separately if they are distinct performance obligations. This often requires significant judgment based upon knowledge of the
products, the solution provided and the structure of the sales contract. In SaaS agreements, the Company provides a service to
the customer which combines the software functionality, maintenance and hosting into a single performance obligation when
the customer doesn’t have the ability to take possession of the underlying software license. The Company may also sell the
same three goods and services in a contract, but there may be three performance obligations, where the customer has the right to
take possession of the software license without significant penalty.
The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis. The
Company estimates standalone selling prices of software based on observable inputs of past transactions to similarly situated
customers. When such observable data is not available for certain software licenses because there is a limited number of
transactions or prices are highly variable, the Company will estimate the standalone selling price using the residual approach.
Standalone selling prices of services are typically determined based on observable transactions when these services are sold on
a standalone basis to similarly situated customers or estimated using a cost-plus margin approach.
Estimating the transaction price of variable consideration including the variable quantity subscription or transaction
contracts in a multiple performance obligation arrangement requires significant judgment. The Company generally estimates
this variable consideration at the most likely amount to which the Company expects to be entitled and in certain cases based on
the expected value. The Company includes estimated amounts in the transaction price to the extent it is probable that a
significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable
consideration is resolved. The Company’s estimates of variable consideration and determination of whether to include
estimated amounts in the transaction price are based largely on an assessment of the Company’s anticipated performance and all
information (historical, current and forecasted) that is reasonably available to us. The Company reviews and updates these
estimates on a quarterly basis.
Income Taxes
In March 2020, in response to the COVID-19 pandemic, the Coronavirus Aid, Relief and Economic Security Act (“CARES
Act”) was signed into law. The CARES Act provides numerous tax provisions and other stimulus measures, including
temporary changes regarding the prior and future utilization of net operating losses. The CARES Act amends the Net Operating
Loss provisions of the Tax Cuts and Jobs Act, allowing for the carryback of losses arising in tax years 2018, 2019 and 2020, to
each of the five taxable years preceding the taxable year of loss.
53
Since we conduct operations on a global basis, our effective tax rate has and will depend upon the geographic distribution
of our pre-tax earnings among locations with varying tax rates. We account for the effects of income taxes that result from our
activities during the current and preceding years. Under this method, deferred income tax liabilities and assets are based on the
difference between the financial statement carrying amounts and the tax basis of assets and liabilities using enacted tax rates in
effect in the years in which the differences are expected to reverse or be utilized. The realization of deferred tax assets is
contingent upon the generation of future taxable income. A valuation allowance is recorded if it is “more likely than not” that a
portion or all of a deferred tax asset will not be realized.
In evaluating our ability to recover our deferred tax assets within the jurisdiction from which they arise, we consider all
available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable
income, tax-planning strategies, and results of recent operations. In projecting future taxable income, we begin with historical
results and incorporate assumptions including the amount of future state, federal and foreign pretax operating income, the
reversal of temporary differences, and the implementation of feasible and prudent tax-planning strategies. These assumptions
require significant judgment about the forecasts of future taxable income and are consistent with the plans and estimates we are
using to manage the underlying businesses.
We recognize a tax benefit from an uncertain tax position only if it is more likely than not to be sustained upon
examination based on the technical merits of the position. The amount of the accrual for which an exposure exists is measured
by determining the amount that has a greater than 50 percent likelihood of being realized upon the settlement of the position.
Components of the reserve are classified as current or a long-term liability in the Consolidated Balance Sheets based on when
we expect each of the items to be settled. We record interest and penalties accrued in relation to uncertain tax benefits as a
component of interest expense.
While we believe we have identified all reasonably identifiable exposures and that the reserve we have established for
identifiable exposures is appropriate under the circumstances, it is possible that additional exposures exist and that exposures
may be settled at amounts different than the amounts reserved. It is also possible that changes in facts and circumstances could
cause us to either materially increase or reduce the carrying amount of our tax reserves. In general, tax returns for the year 2020
and thereafter are subject to future examination by tax authorities.
Our policy has been to leave our cumulative unremitted foreign earnings invested indefinitely outside the United States,
and we intend to continue this policy for most of our foreign subsidiaries. During 2023 we changed our indefinite reinvestment
assertion for our Indian subsidiary and recorded a deferred tax liability associated with the outside basis difference. The
Company continues to assert permanent reinvestment of foreign earnings in all other foreign jurisdictions. Due to the timing
and circumstances of repatriation of such earnings, if any, it is not practicable to determine the unrecognized deferred tax
liability relating to such amounts.
Goodwill
Goodwill is our largest intangible asset. At December 31, 2023, our goodwill balance was $183.9 million, representing
approximately 59% of total assets. Goodwill represents the excess of the purchase price over the fair value of net assets
acquired, including other definite-life intangible assets. Our policy is to perform an impairment test of goodwill at least
annually, and more frequently if events or circumstances occurred that would indicate a reduced fair value in our reporting units
could exist. Typically, we perform a qualitative assessment in the fourth quarter of the fiscal year to determine if it is more
likely than not that the fair value of a reporting unit is less than its carrying value. As part of this qualitative assessment, we
perform a quantitative assessment where necessary in substantiating our qualitative assessment.
During our qualitative assessment we make significant estimates, assumptions, and judgments, around the financial
performance of the Company, changes in our share price, and forecasts of earnings, working capital requirements, and cash
flows. We consider the reporting unit's historical results and operating trends as well as any strategic difference from our
historical results when determining these assumptions.
If we determine that it is more likely than not that the fair value of a reporting unit is less than its carrying amount,
including goodwill, we perform a quantitative goodwill impairment test. Fair value estimates used in the quantitative
impairment test are calculated using a combination of the income and market approaches.
For the income approach, we used projections, which require the use of significant estimates and assumptions specific to
the reporting unit as well as those based on general economic conditions. Factors specific to the reporting unit include revenue
54
and cost growth, profit margins, terminal value growth rates, capital expenditures projections, assumed tax rates, discount rates
and other assumptions deemed reasonable by management.
For the market approach, we used judgment in identifying the relevant comparable-company market multiples. If sufficient
comparable data is not present, the market approach will not be employed. The discount rate for the reporting unit is influenced
by general market conditions as well as factors specific to the reporting unit.
Factors influencing the revenue growth rates include the nature of the services the reporting unit provides for its clients, the
maturity of the reporting unit and any known concentrated customer contract renewals. We believe that the estimates and
assumptions we made are reasonable, but they are susceptible to change from period to period. Actual results of operations,
cash flows and other factors will likely differ from the estimates used in our valuation, and it is possible that differences and
changes could be material.
A deterioration in profitability, adverse market conditions, significant client losses, changes in spending levels of our
existing clients or a different economic outlook than currently estimated by management could have a significant impact on the
estimated fair value of our reporting units and could result in an impairment charge in the future.
The fair value measurement associated with the quantitative goodwill impairment test is based on significant inputs that are
not observable in the market and thus represents a Level 3 measurement. Significant changes in the underlying assumptions
used to value goodwill could significantly increase or decrease the fair value estimates used for impairment assessments.
If the carrying amount exceeds the reporting unit's fair value, we recognize an impairment charge for the amount by which
the carrying amount exceeds the reporting unit's fair value. We recognize any impairment loss in operating income.
2023 Goodwill Impairment Analysis
For our 2023 impairment tests, the Company identified one reporting unit, Core. The Company performed a quantitative
impairment assessment as of October 1, 2023, the fair value of the reporting unit was estimated using the income and market
approach.
Based on the October 1, 2023 quantitative assessment, the indicated fair value of Core exceeded the carrying value in
excess of 10%.
The sale of the Messaging and NetworkX assets as of October 31, 2023 resulted in a strategic shift in our business. Given
these changes in the business, Management performed an additional quantitative goodwill impairment assessment as of the
transaction date. The Company applied a consistent methodology and process as performed in the October 1, 2023 analysis,
which resulted in an indicated fair value of the continuing business that exceeded the carrying value of the remaining goodwill
in excess of 10%.
Capitalized Software Development Costs
Software development costs are accounted for in accordance with either ASC 985-20, “Software - Costs of Software to be
Sold, Leased or Marketed,” or ASC 350-40, “Internal-Use Software.” Costs associated with the planning and designing phase
of software development are classified as research and development costs and are expensed as incurred. The amounts
capitalized include external direct costs of services used in developing internal-use software and employee compensation and
related expenses of personnel directly associated with the development activities. Once technological feasibility has been
determined, a portion of the costs incurred in development, including coding, testing and quality assurance, are capitalized until
available for general release to clients.
Amortization is calculated on a solution-by-solution basis and is recognized over the estimated economic life of the
software, typically ranging two to three years. Amortization begins when the software is substantially completed for its
intended use. Costs incurred during the preliminary and post-implementation stages are expensed as incurred. The amounts
capitalized include external direct costs of services used in developing internal-use software, employee compensation and
related expenses of personnel directly associated with the development activities. Software development costs are evaluated for
recoverability whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable.
Unrecoverable costs are reviewed annually and recognized in the period they become unrecoverable, as needed, and are
recorded in the Consolidated Statements of Operations as depreciation and amortization expense.
55
Recently Issued Accounting Standards
For a discussion of recently issued accounting standards see Note 2. Summary of Significant Accounting Policies of the
Notes to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K.
Off-Balance Sheet Arrangements
We had no off-balance sheet arrangements as of December 31, 2023 and December 31, 2022 that have, or are reasonably
likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results
of operations, liquidity, capital expenditures or capital resources that are material to investors.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market Risk
The following discussion about market risk disclosures involves forward-looking statements. Actual results could differ
materially from those projected in the forward-looking statements. We deposit our excess cash in what we believe are high-
quality financial instruments, primarily money market funds and certificates of deposit and, we may be exposed to market risks
related to changes in interest rates. These investments are denominated in United States dollars.
The primary objective of our investment activities is to preserve our capital for the purpose of funding operations, while at
the same time maximizing the income, we receive from our investments without significantly increasing risk. To achieve these
objectives, our investment policy allows us to maintain a portfolio of cash equivalents and short- and long-term investments in a
variety of securities, which could include commercial paper, money market funds and corporate and government debt securities.
Our cash and cash equivalents at December 31, 2023 and December 31, 2022 were invested in liquid money market accounts
and certificates of deposit. All market-risk sensitive instruments were entered into for non-trading purposes.
Foreign Currency Exchange Risk
We are exposed to translation risk because certain of our foreign operations utilize the local currency as their functional
currency and those financial results must be translated into U.S. dollars. As currency exchange rates fluctuate, translation of the
financial statements of foreign businesses into U.S. dollars affects the comparability of financial results between years.
We do not hold any derivative instruments and do not engage in any hedging activities. Although our reporting currency is
the U.S. dollar, we may conduct business and incur costs in the local currencies of other countries in which we may operate,
make sales and buy materials and services. As a result, we are subject to foreign currency transaction risk. Further, changes in
exchange rates between foreign currencies and the U.S. dollar could affect our future net sales, cost of sales and expenses and
could result in foreign currency transaction gains or losses.
We cannot accurately predict future exchange rates or the overall impact of future exchange rate fluctuations on our
business, results of operations and financial condition. To the extent that our international activities recorded in local currencies
increase in the future, our exposure to fluctuations in currency exchange rates will correspondingly increase and hedging
activities may be considered if appropriate.
Interest Rate Risk
We are exposed to the risk of interest rate fluctuations on the interest income earned on our cash and cash equivalents. A
hypothetical 100 basis point movement in interest rates applicable to our cash and cash equivalents outstanding at December 31,
2023 would increase interest income by approximately $0.2 million on an annual basis.
56
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND NOTES
Report of Independent Registered Public Accounting Firm (PCAOB ID No. 42)
Consolidated Balance Sheets as of December 31, 2023 and 2022
Consolidated Statements of Operations for the years ended December 31, 2023, 2022, and 2021
Consolidated Statements of Comprehensive (Loss) Income for the years ended December 31, 2023, 2022, and
2021
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2023, 2022, and 2021
Consolidated Statements of Cash Flows for the years ended December 31, 2023, 2022, and 2021
Notes to Consolidated Financial Statements
Note 1. Description of Business
Note 2. Summary of Significant Accounting Policies
Note 3. Revenue
Note 4. Divestitures and Discontinued Operations
Note 5. Accounts Receivable Securitization Facility
Note 6. Allowance for Credit Losses
Note 7. Fair Value Measurements
Note 8. Note receivable
Note 9. Property and Equipment
Note 10. Goodwill and Intangibles
Note 11. Accrued Expenses
Note 12. Leases
Note 13. Debt
Note 14. Accumulated Other Comprehensive (Loss) / Income
Note 15. Capital Structure
Note 16. Stock Plans
Note 17. 401(k) Plan
Note 18. Restructuring
Note 19. Income Taxes
Note 20. Earnings per Common Share (“EPS”)
Note 21. Commitments
Note 22. Legal Matters
Note 23. Additional Financial Information
Note 24. Summary of Quarterly Results of Operations (Unaudited)
57
Page No.
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66
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96
99
102
102
103
108
109
109
110
111
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Synchronoss Technologies, Inc.:
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Synchronoss Technologies, Inc. (the Company) as of
December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive (loss) income, stockholders’
equity and cash flows for each of the three years in the period ended December 31, 2023, and the related notes and financial
statement schedule listed in the Index at Item 15(a)(2) (collectively referred to as the “consolidated financial statements”). In
our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company
at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period
ended December 31, 2023, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in
Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(2013 framework) and our report dated March 25, 2024 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on
the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to
error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that
were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that
are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as
a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit
matters or on the accounts or disclosures to which they relate.
Description of the
Matter
New or Modified Revenue Arrangements with Multiple Performance Obligations - Identifying
contracts and performance obligations
As discussed in Note 3. Revenue and Note 4. Divestitures and Discontinued Operations of the
consolidated financial statements, the Company recognized $164.2 million in revenue from
continuing operations and $55.4 million in revenue from discontinued operations, respectively,
across all service lines. The Company’s revenue agreements frequently contain multiple
performance obligations and judgment is required to determine which performance obligations are
distinct and accounted for separately. Additionally, the Company may enter into multiple
agreements with the same customer, which may affect the identification of the contract, the
performance obligations and the allocation of total contract consideration. Auditing the Company’s
new or modified revenue arrangements that included multiple performance obligations was complex
and involved a high degree of judgment related to management’s identification of performance
obligations and allocation of contract consideration.
58
How We Addressed the
Matter in Our Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness of
internal controls related to the Company’s process for identifying and assessing new or modified
revenue arrangements that included multiple performance obligations as well as recognizing the
related revenue, including controls over management’s review of the significant judgments used in
the identification of the contract, the distinct performance obligations, and the allocation of contract
consideration to each performance obligation.
Description of the
Matter
How We Addressed the
Matter in Our Audit
Our audit procedures also included, among others, reading a sample of customer contracts and the
Company’s accounting policies. We evaluated management’s identification of the contract, the
related distinct performance obligations and assessed the allocation of contract consideration to each
performance obligation.
Goodwill
At December 31, 2023, the Company's goodwill balance was $183.9 million. As discussed in Note
10. Goodwill and Intangibles of the consolidated financial statements, goodwill is tested for
impairment at least annually on October 1 at the reporting unit level. Auditing the Company's
goodwill impairment test was complex due to the significant judgment required in determining the
fair value of the reporting unit. In particular, the fair value estimate was sensitive to significant
assumptions that require judgment, including revenue growth rates, operating expenses as a
percentage of revenue that affect the amount and timing of future cash flows, and the weighted
average cost of capital ("discount rate"), which are affected by factors such as general market
conditions and recent operating performance.
We obtained an understanding, evaluated the design and tested the operating effectiveness of
controls over the Company's goodwill impairment review process. For example, we tested controls
over management's review of the valuation model and the significant assumptions, discussed above
used to develop the prospective financial information. We also tested management's controls to
validate that the data used in the valuation was complete and accurate.
To test the estimated fair value of the Company's reporting unit, we performed audit procedures that
included, among others, assessing the reasonableness of the methodologies used. We also compared
the significant assumptions used by management to develop the prospective financial information to
recent operating trends, analyst expectations, changes to the Company's business model, customer
base or product mix and other relevant information. We assessed the historical accuracy of
management's projections of future earnings by comparing the actual results to prior forecasts, and
we performed analyses of significant assumptions to assess the impact of changes in the
assumptions on the calculation of fair value. We also involved our valuation specialists to assist
with our evaluation of the methodology used by the Company and significant assumptions included
in the fair value estimates.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2001.
Iselin, New Jersey
March 25, 2024
59
SYNCHRONOSS TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
ASSETS
Current assets:
Cash and cash equivalents
Accounts receivable, net
Prepaid & other current assets
Assets of discontinued operations, current (Note 4)
Total current assets
Non-current assets:
Property and equipment, net
Operating lease right-of-use assets
Goodwill
Intangible assets, net
Note receivable
Other assets, non-current
Assets of discontinued operations, non-current (Note 4)
Total non-current assets
Total assets
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
Accrued expenses
Deferred revenues, current
Liabilities of discontinued operations, current (Note 4)
Total current liabilities
Long-term debt, net of debt issuance costs
Deferred tax liabilities
Leases, non-current
Other liabilities, non-current
Liabilities of discontinued operations, non-current (Note 4)
Total liabilities
Commitments and contingencies:
$
$
$
December 31,
2023
2022
24,572 $
23,477
33,953
—
82,002
3,673
14,791
183,908
22,214
—
3,749
—
228,335
310,337 $
7,475 $
39,127
1,095
—
47,697
136,215
3,207
23,593
1,691
—
212,403
18,310
31,685
32,998
22,294
105,287
4,441
20,106
182,259
22,356
4,834
4,053
54,736
292,785
398,072
9,700
44,314
1,948
24,221
80,183
134,584
466
29,145
2,695
2,054
249,127
Series B Non-Convertible Perpetual Preferred Stock, $0.0001 par value; 150 and 150
shares authorized, 61 and 71 shares issued and outstanding at December 31, 2023 and
December 31, 2022, respectively
Redeemable noncontrolling interest
58,802
68,348
12,500
12,500
Stockholders’ equity:
Common stock, $0.0001 par value; 16,667 and 16,667 shares authorized, 10,314 and
10,137 shares issued; 10,314 and 10,137 outstanding at December 31, 2023 and
December 31, 2022, respectively
Additional paid-in capital
Accumulated other comprehensive loss
Accumulated deficit
Total stockholders’ equity
Total liabilities and stockholders’ equity
1
1
483,527
(25,732)
(431,164)
26,632
310,337 $
488,856
(44,131)
(376,629)
68,097
398,072
$
See accompanying notes to consolidated financial statements.
60
SYNCHRONOSS TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Net revenues
Costs and expenses:
Cost of revenues1
Research and development
Selling, general and administrative
Restructuring charges
Depreciation and amortization
Total costs and expenses
(Loss) income from operations
Interest income
Interest expense
Gain on sale of DXP
Other (expense) income, net
Loss from continuing operations, before taxes
(Provision) benefit for income taxes
Net loss from continuing operations
Discontinued operations (Note 4):
Net (loss) income from discontinued operations, before taxes
Loss on divestiture
(Provision) benefit for income taxes
Net (loss) income from discontinued operations, net of taxes
Net loss
Net income (loss) attributable to redeemable noncontrolling interests
Preferred stock dividend
Net loss attributable to Synchronoss
Earnings (loss) per share:
Basic:
Net loss from continuing operations
Net (loss) income from discontinued operations
Basic
Diluted:
Net loss from continuing operations
Net (loss) income from discontinued operations
Diluted
Weighted-average common shares outstanding:
Basic
Diluted
_____________________________
Year Ended December 31,
2022
2021
2023
$
164,196 $
173,756 $
189,342
42,218
46,565
65,216
4,013
16,830
174,842
(10,646)
426
(13,963)
—
(5,128)
(29,311)
(4,743)
(34,054)
(2,200)
(16,382)
(1,935)
(20,517)
(54,571)
36
(10,007)
(64,542) $
46,500
49,598
61,153
1,443
14,756
173,450
306
453
(13,639)
2,549
3,553
(6,778)
59
(6,719)
921
—
(1,918)
(997)
(7,716)
(200)
(9,552)
(17,468) $
(4.52) $
(2.10)
(6.62) $
(4.52) $
(2.10)
(6.62) $
(1.71) $
(0.10)
(1.81) $
(1.71) $
(0.10)
(1.81) $
9,745
9,745
9,626
9,626
60,160
59,811
74,219
3,684
17,231
215,105
(25,763)
38
(6,411)
—
(4,916)
(37,052)
8,787
(28,265)
6,777
—
(1,610)
5,167
(23,098)
156
(35,509)
(58,451)
(8.79)
0.71
(8.08)
(8.79)
0.71
(8.08)
7,235
7,235
$
$
$
$
$
1
Cost of revenues excludes depreciation and amortization which are shown separately.
See accompanying notes to consolidated financial statements.
61
SYNCHRONOSS TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(In thousands)
Net loss
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments
Net income on inter-company foreign currency transactions
Total other comprehensive income (loss)
Comprehensive loss
Year Ended December 31,
2022
2021
2023
$
(54,571) $
(7,716) $
(23,098)
18,399
—
18,399
(36,172)
(11,261)
115
(11,146)
(18,862)
(3,274)
(1,498)
(4,772)
(27,870)
Comprehensive income (loss) attributable to redeemable noncontrolling
interests
36
(200)
156
Comprehensive loss attributable to Synchronoss
$
(36,136) $
(19,062) $
(27,714)
See accompanying notes to consolidated financial statements.
62
SYNCHRONOSS TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands)
Common Stock
Treasury Stock
Additional
Shares
Amount
Shares
Amount
Paid-In
Capital
Accumulative
Other
Comprehensi
ve Income
(Loss)
Total
Accumulat
ed deficit
Stockholder
s' Equity
(796) $ (82,087) $ 499,352 $
(28,213) $ (345,771) $
43,282
Balance at December 31, 2020
5,734 $
Stock based compensation
Issuance of restricted stock
Preferred stock dividends accrued
Amortization of preferred stock issuance costs
Issuance of common stock related to acquisition
Common Stock - Issuance Costs
Retirement of treasury stock
Net loss
Non-controlling interest
Total other comprehensive income (loss)
—
216
—
—
4,701
—
(796)
—
—
—
Balance at December 31, 2021
9,855 $
1
—
—
—
—
—
—
—
—
—
—
1
—
—
—
—
—
—
—
—
—
—
9,259
1
(22,718)
(12,791)
—
110,000
—
(8,340)
796
82,087
(82,087)
—
—
—
—
—
—
—
(156)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
9,259
1
(22,718)
(12,791)
110,000
(8,340)
—
(23,098)
(23,098)
156
—
—
(4,772)
—
(4,772)
— $
— $ 492,520 $
(32,985) $ (368,713) $
90,823
Common Stock
Treasury Stock
Additional
Shares
Amount
Shares
Amount
Paid-In
Capital
Accumulative
Other
Comprehensi
ve Income
(Loss)
Total
Accumulat
ed deficit
Stockholder
s' Equity
Balance at December 31, 2021
9,855 $
Stock based compensation
Issuance of restricted stock
Preferred stock dividend
Amortization of preferred stock issuance costs
Shares withheld for taxes in connection with issuance of restricted
stock
Net loss
Non-controlling interest
Total other comprehensive income (loss)
—
290
—
—
(8)
—
—
—
Balance at December 31, 2022
10,137 $
1
—
—
—
—
—
—
—
—
1
— $
— $ 492,520 $
(32,985) $ (368,713) $
90,823
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
5,771
—
(9,409)
(143)
(83)
—
200
—
—
—
—
—
—
—
—
—
—
5,771
—
(9,409)
(143)
—
(83)
(7,716)
(7,716)
(200)
—
(11,146)
—
(11,146)
— $
— $ 488,856 $
(44,131) $ (376,629) $
68,097
Common Stock
Treasury Stock
Additional
Shares
Amount
Shares
Amount
Paid-In
Capital
Accumulative
Other
Comprehensi
ve Income
(Loss)
Total
Accumulat
ed deficit
Stockholder
s' Equity
Balance at December 31, 2022
10,137 $
Stock based compensation
Issuance of restricted stock
Preferred stock dividend
Amortization of preferred stock issuance costs
Shares withheld for taxes in connection with issuance of restricted
stock
Net loss
Non-controlling interest
Total other comprehensive income (loss)
—
207
—
—
(30)
—
—
—
Balance at December 31, 2023
10,314 $
1
—
—
—
—
—
—
—
—
1
— $
— $ 488,856 $
(44,131) $ (376,629) $
68,097
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
4,963
—
(9,679)
(328)
(249)
—
(36)
—
—
—
—
—
—
—
—
18,399
—
—
—
—
—
4,963
—
(9,679)
(328)
(249)
(54,571)
(54,571)
36
—
—
18,399
— $
— $ 483,527 $
(25,732) $ (431,164) $
26,632
See accompanying notes to consolidated financial statements.
63
SYNCHRONOSS TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Operating activities:
Net loss from continuing operations
$
(34,054) $
(6,719) $
(28,265)
Net (loss) income from discontinued operations, net of taxes
(20,517)
(997)
5,167
Year Ended December 31,
2022
2023
2021
Adjustments to reconcile net income (loss) to net cash used in operating
activities:
Depreciation and amortization
Impairment of long-lived assets and capitalized software
Amortization of debt issuance costs
Loss on disposals of fixed assets
Gain on sale of DXP business
Loss on divestiture
Gain on disposals of intangible assets
Amortization of bond discount
Deferred income taxes
Stock-based compensation
Contingent consideration obligation
STIN Note receivable impairment
Operating lease impairment, net
Changes in operating assets and liabilities:
Accounts receivable, net
Prepaid expenses and other current assets
Accounts payable
Accrued expenses
Deferred revenues
Other liabilities
Net cash provided by operating activities
Investing activities:
Purchases of fixed assets
Additions to capitalized software
Proceeds from the sale of intangibles
Proceeds from the divestiture, net
Proceeds from the sale of DXP business
27,347
—
1,534
27
—
16,382
—
97
2,741
5,153
1,483
4,834
1,918
14,237
(473)
(5,353)
(5,208)
6,384
2,297
18,829
31,753
—
1,391
126
(2,549)
—
—
88
(164)
5,461
3,638
—
175
14
6,954
3,024
(8,430)
(8,312)
(8,094)
17,359
34,760
1,305
624
263
—
—
(550)
9
463
9,343
—
—
1,353
(748)
(4,394)
(2,031)
3,468
(21,972)
6,150
4,945
(1,302)
(1,408)
(18,572)
(19,758)
(1,521)
(22,972)
—
23,674
—
—
—
8,000
550
—
—
Net cash provided by (used in) investing activities
$
3,800 $
(13,166) $
(23,943)
64
SYNCHRONOSS TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands) (Continued)
Financing activities:
Share-based compensation-related proceeds, net of taxes paid on
withholding shares
Taxes paid on withholding shares
Debt issuance costs related to long term debt
Proceeds from issuance of long term debt
Drawdown on A/R Facility
Repayment of A/R Facility and Revolving Credit Facility
Proceeds from issuance of common stock
Common stock issuance costs
Proceeds from issuance of Series B Preferred stock
Series B Preferred stock issuance costs
Series B Preferred dividend paid in cash
Redemption of Series B Preferred stock
Redemption of Series A Preferred stock
Year Ended December 31,
2022
2023
2021
(8)
(249)
—
—
12,000
(12,000)
—
—
—
—
(9,848)
(9,874)
—
—
(83)
—
—
—
—
—
—
—
—
(6,455)
(6,738)
(1)
(1)
(8,606)
141,077
—
(10,000)
110,000
(8,340)
75,000
(2,495)
(1,781)
—
—
(278,665)
Net cash (used in) provided by financing activities
Effect of exchange rate changes on cash
(19,979)
(13,276)
1
(500)
16,188
643
Net increase (decrease) in cash and cash equivalents
$
2,651 $
(9,583) $
(2,167)
Beginning cash and cash equivalents from continuing operations
Beginning cash and cash equivalents from discontinued operations
Beginning cash and cash equivalents
Ending cash and cash equivalents from continuing operations
Ending cash and cash equivalents from discontinued operations
18,310
3,611
21,921
24,572
—
29,336
2,168
31,504
18,310
3,611
Ending cash and cash equivalents
$
24,572 $
21,921 $
31,679
1,992
33,671
29,336
2,168
31,504
Supplemental disclosures of cash flow information:
Cash paid for income taxes
Cash refund for income taxes
Cash paid for interest
Supplemental disclosures of non-cash investing and financing activities:
Paid in kind dividends on Series A Preferred stock 1
Amortization of Series B Preferred stock issuance costs and paid in kind
dividends
$
$
$
$
$
3,399 $
991 $
4,562 $
5,206 $
11,894 $
11,822 $
3,449
420
3,657
— $
— $
31,277
328 $
2,581 $
—
________________________________
1
Includes amortization of preferred stock issuance costs accelerated due to Series A redemption.
See accompanying notes to consolidated financial statements.
65
SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except for per share data or unless otherwise noted)
Note 1. Description of Business
General
Synchronoss Technologies, Inc. (“Synchronoss” or the “Company”) is a leading provider of white label cloud, messaging,
digital and network management solutions that enable our customers to keep subscribers, systems, networks and content in
sync.
The Synchronoss Personal CloudTM solution is designed to create an engaging and trusted customer experience through
ongoing content management and engagement. The Synchronoss Personal CloudTM platform is a secure and highly scalable,
white label platform that allows our customers’ subscribers to backup and protect, engage with, and manage their personal
content and gives our operator customers the ability to increase average revenue per user (“ARPU”) and reduce churn.
Our Synchronoss Personal CloudTM platform is specifically designed to support smartphones, tablets, desktops computers,
and laptops.
Synchronoss’ Messaging platform (Owned and operated through October 31, 2023) powers mobile messaging and
mailboxes for hundreds of millions of telecommunication subscribers. Our Advanced Messaging platform is a powerful, secure,
intelligent, white label messaging platform that expands capabilities for communications service provider and multi-service
providers to offer P2P messaging via Rich Communications Services (“RCS”). Our Mobile Messaging Platform (“MMP”) is
poised to provide a single standard ecosystem for onboarding and management to brands, advertisers and message wholesalers.
The Synchronoss NetworkX (Owned and operated through October 31, 2023) products provide operators with the tools and
software to design their physical network, streamline their infrastructure purchases, and manage and optimize comprehensive
network expenses for leading top tier carriers around the globe.
Note 2. Summary of Significant Accounting Policies
Discontinued Operations
On October 31, 2023, Synchronoss Technologies, Inc. entered into an Asset Purchase Agreement with Lumine Group
Software Solutions (Ireland) Limited, pursuant to which the Company sold its Messaging and NetworkX businesses. This
transaction represents a strategic shift designed to maximize shareholder value and allow the Company to solely focus on
providing cloud-centric solutions. In connection with the sale transaction, the Company determined its Messaging and
NetworkX Businesses qualified for discontinued operations accounting treatment in accordance with ASC 205-20.
Accordingly, the operating results of, and costs to separate the Messaging and NetworkX businesses are reported in Net loss
from discontinued operations, net of taxes in the Consolidated Statements of Operations for all periods presented. In addition,
the related assets and liabilities held prior to the sale are reported as Assets and liabilities of discontinued operations on the
Consolidated Balance Sheets. The notes to the financial statements have been adjusted on a retrospective basis. For additional
information, see Note 4. Divestitures and Discontinued Operations of the Notes to Consolidated Financial Statements in Item 8
of this Form 10-K.
Basis of Presentation and Consolidation
The consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries and variable
interest entities (“VIE”) in which the Company is the primary beneficiary and entities in which the Company has a controlling
interest. Investments in less than majority-owned companies in which the Company does not have a controlling interest, but
does have significant influence, are accounted for as equity method investments. Investments in less than majority-owned
companies in which the Company does not have the ability to exert significant influence over the operating and financial
policies of the investee are accounted for using the cost method. All material intercompany transactions and accounts are
eliminated in consolidation.
66
SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except for per share data or unless otherwise noted)
Unless otherwise noted, tables are presented in U.S. dollars in thousands. Certain columns and rows may not add due to the
use of rounded numbers. Percentages presented are calculated from the underlying numbers in thousands. Earnings per share
amounts are computed independently for earnings from continuing operations, earnings from discontinued operations and net
earnings. As a result, the sum of per-share amounts may not equal the total. Unless otherwise noted, all amounts and disclosures
included in the Notes to Consolidated Financial Statements reflect only the Company's continuing operations except for the
Consolidated Statements of Cash Flows, which are presented for the whole company. For supplemental cash flow disclosures,
see Note 4. Divestitures and Discontinued Operations of the Notes to Consolidated Financial Statements in Item 8 of this Form
10-K.
During the fourth quarter of 2023 there was a change in the capital structure due to a reverse stock split, which decreased
the number of common shares outstanding. The Company retroactively displayed the effect of the change in the Consolidated
Balance Sheets, and retroactively adjusted the computations of basic and diluted EPS for all periods presented on the
Consolidated Statement of Operations. For additional information, see Note 15. Capital Structure of the Notes to Consolidated
Financial Statements in Item 8 of this Form 10-K.
Risks and Uncertainties
There continue to be uncertainties regarding the current geopolitical tensions. The Company is closely monitoring the
impact of the geopolitical environment on all aspects of its business, including how it will impact its customers, employees,
suppliers, vendors, business partners and distribution channels. While the geopolitical environment did not materially affect the
Company’s financial results and business operations for the year ended December 31, 2023, the Company is unable to predict
the impact these factors will have on its financial position and operating results due to numerous uncertainties. The Company
will continue to assess the evolving impact of geopolitical tensions and will make adjustments to its operations as necessary.
Recently Issued Accounting Standards
Standards issued not yet adopted
Standard
Update 2023-09 -
Income Taxes (Topic
740) - Improvements
to Income Tax
Disclosures
Description
The amendments in this Update related to the rate reconciliation
and income taxes paid disclosures improve the transparency of
income tax disclosures by requiring (1) consistent categories and
greater disaggregation of information in the rate reconciliation and
(2) income taxes paid disaggregated by jurisdiction.
Effect on the financial statements
The Company continues to evaluate these
changes and does not anticipate any
material
the Company’s
consolidated financial position or results of
operations upon adoption.
impact on
Planned date of
adoption: January 1,
2025
Update 2023-07 -
Segment Reporting
(Topic 280) -
Improvements to
Reportable Segment
Disclosures
Planned date of
adoption: January 1,
2024
Use of Estimates
The amendments in this Update improve reportable segment
disclosure requirements, primarily through enhanced disclosures
about significant segment expenses. The amendments in this
Update Requires that a public entity that has a single reportable
segment provide all the disclosures required by the amendments in
this Update and all existing segment disclosures in Topic 280.
The Company continues to evaluate these
changes and does not anticipate any
the Company’s
material
consolidated financial position or results of
operations upon adoption.
impact on
The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”)
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure
of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses
during the reporting periods. Actual results could differ from those estimates.
67
SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except for per share data or unless otherwise noted)
Revenue Recognition
Revenues are recognized when control of the promised goods or services are transferred to the Company’s customers, in an
amount that reflects the consideration that the Company expects to receive in exchange for those goods or services. The
Company generates all of its revenue from contracts with customers.
Subscription and Transaction revenues consist of revenues derived from the processing of transactions through the
Company’s service platforms, providing enterprise portal management services on a subscription basis and maintenance
agreements on software licenses. The Company generates revenue from Subscription services from monthly active user fees,
software as a service (“SaaS”) fees, hosting and storage fees, and fees for the related maintenance support for those services. In
most cases, the subscription or transaction arrangement is a single performance obligation comprised of a series of distinct
services that are substantially the same and that have the same pattern of transfer (i.e., distinct days of service). The Company
applies the variable consideration allocation exception when the terms of variable payment relate specifically to efforts to
satisfy the performance obligation or the transfer of service based on usage within the corresponding period, under Topic 606
Section 10-25-14(b) – in such situations the revenue booked and the revenue billed for any month are the same. When the
Company does not allocate variable consideration to distinct periods of service or apply the variable consideration allocation
exception, the total estimated transaction price is recognized ratably over the term of the contract, where the level of service
provided to the customer does not vary significantly from one period to another.
Transaction service arrangements include services such as processing equipment orders, new account setup and activation,
number port requests, credit checks and inventory management.
Transaction revenues are principally based on a contractual price per transaction and are recognized based on the number
of transactions processed during each reporting period. Revenues are recorded based on the total number of transactions
processed at the applicable price established in the relevant contract.
Many of the Company’s contracts guarantee minimum volume transactions from the customer. In these instances, if the
customer’s total estimated transaction volume for the period is expected to be less than the contractual amount, the Company
records revenues at the minimum guaranteed amount ratably over the period covered by the minimum. Setup fees for
transactional service arrangements are deferred until set up activities are completed and recognized on a straight-line basis over
remaining expected customer relationship period. Revenues are presented net of discounts, which are volume level driven.
In accordance with Topic 606 Section 10-50-20, any credits due to customers, which are generally performance driven and
based upon system availability or response times to incidents, are determined and accounted for as a reduction to revenue in the
period in which the services are provided. The Company recognizes revenues from support and maintenance performance
obligations over the service delivery period.
The Company’s software licenses typically provide for a perpetual or term right to use the Company’s software. The
Company has concluded that in most cases its software license is distinct as the customer can benefit from the software on its
own. Software revenue is typically recognized when the software is delivered to the customer. Contracts that include software
customization or specified upgrades may result in the combination of the customization services with the software license as
one performance obligation. The Company does not have a history of returns, or refunds of is software licenses, however, in
limited instances, the Company may constrain consideration to high-risk customers, until collection is resolved.
The Company’s professional services include software development and customization. The contracts generally include
project deliverables specified by each customer. The performance obligations in the agreements are generally combined into
one deliverable and generally result in the transfer of control over time. The underlying deliverable is owned and controlled by
the customer and does not create an asset with an alternative use to us. The Company recognizes revenue on fixed fee contracts
on the proportion of labor hours expended to the total hours expected to complete the contract performance obligation, or
ratably to the extent the level of effort to satisfy the performance obligation is materially consistent each period.
Most of the Company’s contracts with customers contain multiple performance obligations which generally include either
1) a perpetual software license with support and maintenance and sometimes a hosting agreement or 2) a term SaaS agreement,
frequently sold along with professional services. For these contracts, the Company accounts for individual goods and services
68
SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except for per share data or unless otherwise noted)
separately if they are distinct performance obligations. This often requires significant judgment based upon knowledge of the
products, the solution provided and the structure of the sales contract. In SaaS agreements, the Company provides a service to
the customer which combines the software functionality, maintenance and hosting into a single performance obligation when
the customer doesn’t have the ability to take possession of the underlying software license. The Company may also sell the
same three goods and services in a contract, but there may be three performance obligations, where the customer has the right to
take possession of the software license without significant penalty.
The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis. The
Company estimates standalone selling prices of software based on observable inputs of past transactions to similarly situated
customers. When such observable data is not available for certain software licenses because there is a limited number of
transactions or prices are highly variable, the Company will estimate the standalone selling price using the residual approach.
Standalone selling prices of services are typically determined based on observable transactions when these services are sold on
a standalone basis to similarly situated customers or estimated using a cost-plus margin approach.
Estimating the transaction price of variable consideration including the variable quantity subscription or transaction
contracts in a multiple performance obligation arrangement requires significant judgment. The Company generally estimates
this variable consideration at the most likely amount to which the Company expects to be entitled and in certain cases based on
the expected value. The Company includes estimated amounts in the transaction price to the extent it is probable that a
significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable
consideration is resolved. The Company’s estimates of variable consideration and determination of whether to include
estimated amounts in the transaction price are based largely on an assessment of the Company’s anticipated performance and all
information (historical, current and forecasted) that is reasonably available. The Company reviews and updates these estimates
on a quarterly basis.
The Company’s typical performance obligations include the following:
Performance Obligation
When Performance Obligation is Typically Satisfied
How Standalone Selling Price is Typically
Estimated
Software License
Software License
Upon shipment or made available for download (point in time)
Observable transactions or residual approach when
prices are highly variable or uncertain
Software License with significant
customization
Over the performance of the customization and installation of
the software (over time)
Residual approach
Hosting Services
Professional Services
Consulting
Customization
Transaction Services
Subscription Services
Customer Support
SaaS
As hosting services are provided (over time)
Estimated using a cost-plus margin approach
As work is performed (over time)
Observable transactions
SaaS: Over the remaining term of the SaaS agreement
Observable transactions
License: Over the performance of the customization and
installation of the software (over time)
As transaction is processed (over time)
Observable transactions
Ratably over the course of the support contract (over time)
Observable transactions
Over the course of the SaaS service once the system is
available for use (over time)
Estimated using a cost-plus margin approach
The payments for the Company’s performance obligations are typically due within 90 days of services being provided for
Software License, Professional Services, and Subscription Services, and due within 90 days of transaction for Transaction
Services.
Deferred Revenue
Deferred revenues represent billings to customers for services in advance of the performance of services, with revenues
recognized as the services are rendered.
69
SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except for per share data or unless otherwise noted)
Service Level Standards
Pursuant to certain contracts, the Company is subject to service level standards and to corresponding penalties for failure to
meet those standards. All performance-related penalties are reflected as a corresponding reduction of the Company’s revenues.
These penalties, if applicable, are recorded in the month incurred and were insignificant for the years ended December 31,
2023, 2022 and 2021, respectively.
Cost of Revenues
Cost of services includes all direct materials, direct labor and those indirect costs related to revenues such as indirect labor,
materials and supplies and facilities cost, exclusive of depreciation and amortization expense.
Research and Development
Software development costs are accounted for in accordance with either ASC 985-20, “Software - Costs of Software to be
Sold, Leased or Marketed,” or ASC 350-40, “Internal-Use Software.” Costs associated with the planning and designing phase
of software development are classified as research and development costs and are expensed as incurred. The amounts
capitalized include external direct costs of services used in developing internal-use software, and employee compensation and
related expenses of personnel directly associated with the development activities. Once technological feasibility has been
determined, a portion of the costs incurred in development, including coding, testing and quality assurance, are capitalized until
available for general release to clients.
Amortization is calculated on a solution-by-solution basis and is recognized over the estimated economic life of the
software, typically ranging two to three years. Amortization begins when the software is substantially completed for its
intended use. Costs incurred during the preliminary and post-implementation stages are expensed as incurred. The amounts
capitalized include external direct costs of services used in developing internal-use software, employee compensation and
related expenses of personnel directly associated with the development activities. Software development costs are evaluated for
recoverability whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable.
Unrecoverable costs are reviewed annually and recognized in the period they become unrecoverable, as needed, and are
recorded in the Consolidated Statements of Operations as depreciation and amortization expense.
The unamortized software development costs and amortization expense were as follows:
Unamortized software development costs
Software development amortization expense
Year ended December 31,
2023
2022
2021
$
$
19,327 $
13,633 $
18,374 $
10,265 $
17,040
7,630
The Company recognized no impairment charges to its capitalized software intangible assets for the years ended December
31, 2023, 2022 and 2021, respectively.
Concentration of Credit Risk
The Company’s financial instruments that are exposed to concentration of credit risk consist primarily of cash and cash
equivalents and accounts receivable. The Company maintains its cash and cash equivalents at several major financial
institutions. The Company believes that concentration of credit risk with respect to accounts receivable is limited because of the
creditworthiness of its major customers.
The Company’s top five customers accounted for 96.6%, 94.6% and 92.4% of net revenues for the years ended December
31, 2023, 2022 and 2021, respectively. Contracts with these customers typically run for three to five years. Of these customers,
Verizon accounted for more than 10% of the Company’s revenues in 2023, 2022, and 2021, and AT&T accounted for more
than 10% of the Company’s revenues in 2023.
70
SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except for per share data or unless otherwise noted)
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an original maturity of three months or less at the
date of acquisition to be cash equivalents.
Accounts Receivable
Accounts receivable include amounts billed to customers, claims, and unbilled revenue, which consists of amounts
recognized as sales but not yet billed. Substantially all amounts of unbilled receivables are expected to be billed and collected in
the subsequent year. The Company had unbilled receivable balances of $0.7 million and $0.5 million as of December 31, 2023
and 2022, respectively.
Allowance for Credit Losses
The Company is exposed to credit losses primarily through sales of products and services. The Company’s expected loss
allowance methodology for accounts receivable is developed using historical collection experience, current and future economic
and market conditions and a review of the current status of customers' trade accounts receivables. Customers are pooled based
on sharing specific risk factors, including geographic location. Due to the short-term nature of such receivables, the estimated
accounts receivable that may not be collected is based on aging of the accounts receivable balances.
Customers are assessed for credit worthiness upfront through a credit review, which includes assessment based on our
analysis of their financial statements when a credit rating is not available. The Company evaluates contract terms and
conditions, country and political risk, and may require prepayment to mitigate risk of loss. Specific allowance amounts are
established to record the appropriate provision for customers that have a higher probability of default. The Company monitors
changes to the receivables balance on a timely basis, and balances are written off as they are determined to be uncollectible
after all collection efforts have been exhausted. Estimates of potential credit losses are used to determine the allowance; they
are based on assessment of anticipated payment and all other historical, current and future information that is reasonably
available.
Fair Value of Financial Instruments and Liabilities
The Company includes disclosures of fair value information about financial instruments and liabilities, whether or not
recognized on the Consolidated Balance Sheets, for which it is practicable to estimate that value. Due to their short-term nature,
the carrying amounts reported in the financial statements approximate the fair value for cash and cash equivalents, marketable
securities, accounts receivable and accounts payable.
Property and Equipment
Property and equipment and leasehold improvements are stated at cost, net of accumulated depreciation. Depreciation is
computed using the straight-line method over the estimated useful lives of the assets, which range from 3 to 5 years, or the
lesser of the related initial term of the lease or useful life for leasehold improvements. Amortization of property and equipment
recorded under a capital lease is included with depreciation expense. Expenditures for routine maintenance and repairs are
charged against operations, while major replacements, improvements and additions are capitalized.
71
SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except for per share data or unless otherwise noted)
Noncontrolling Interests and Mandatorily Redeemable Financial Instruments
Noncontrolling interests (“NCI”) are evaluated by the Company and are shown as either a liability, temporary equity
(shown between liabilities and equity) or as permanent equity depending on the nature of the redeemable features at amounts
based on formulas specific to each entity. Generally, mandatorily redeemable NCIs are classified as liabilities and non-
mandatorily redeemable NCIs are classified outside of stockholders’ equity in the Consolidated Balance Sheets as temporary
equity under the caption Redeemable noncontrolling interests, and are measured at their redemption values at the end of each
period. If the redemption value is greater than the carrying value, an adjustment is recorded in retained earnings to record the
NCI at its redemption value. Redeemable NCIs that are mandatorily redeemable are classified as a liability in the Consolidated
Balance Sheets under either other current liabilities or other long-term liabilities, depending on the remaining duration until
settlement, and are measured at the amount of cash that would be paid if settlement occurred at the balance sheet date with any
change from the prior period recognized as interest expense.
If the noncontrolling interest is not currently redeemable yet probable of becoming redeemable, the Company is required to
either (1) accrete changes in the redemption value over the period from the date of issuance to the earliest redemption date of
the instrument using an appropriate methodology, usually the interest method, or (2) recognize changes in the redemption value
immediately as they occur and adjust the carrying value of the security to equal the redemption value at the end of each
reporting period. The Company has elected to recognize changes in the redemption value immediately as they occur and adjust
the carrying value of the noncontrolling interest to the greater of the estimated redemption value, which approximates fair
value, at the end of each reporting period or the initial carrying amount.
Net income attributable to NCIs reflects the portion of the net income (loss) of consolidated entities applicable to the NCI
stockholders in the accompanying Consolidated Statements of Operations. The net income attributable to NCI is classified in
the Consolidated Statements of Operations as part of consolidated net income and deducted from total consolidated net income
to arrive at the net income attributable to the Company.
Investments in Affiliates and Other Entities
In the normal course of business, Synchronoss enters into various types of investment arrangements, each having unique
terms and conditions. These investments may include equity interests held by Synchronoss in business entities, including
general or limited partnerships, contractual ventures, or other forms of equity participation. Synchronoss determines whether
such investments involve a variable interest entity (“VIE”) based on the characteristics of the subject entity. If the entity is
determined to be a VIE, then management determines if Synchronoss is the primary beneficiary of the entity and whether or not
consolidation of the VIE is required. The primary beneficiary consolidating the VIE must normally have both (i) the power to
direct the activities of a VIE that most significantly affect the VIE’s economic performance and (ii) the obligation to absorb
losses of the VIE or the right to receive benefits from the VIE, in either case that could potentially be significant to the VIE.
When Synchronoss is deemed to be the primary beneficiary, the VIE is consolidated and the other party’s equity interest in the
VIE is accounted for as a noncontrolling interest.
The Company generally accounts for investments it makes in VIEs in which it has determined that it does not have a
controlling financial interest but has significant influence over and holds at least a 20% ownership interest using the equity
method. Any such investment not meeting the parameters to be accounted under the equity method would be accounted for
using the cost method unless the investment had a readily determinable fair value, at which it would then be reported.
If an entity fails to meet the characteristics of a VIE, the Company then evaluates such entity under the voting model.
Under the voting model, the Company consolidates the entity if they determine that they, directly or indirectly, have greater
than 50% of the voting shares, and determine that other equity holders do not have substantive participating rights.
Goodwill
Goodwill represents the excess of the purchase price over the fair value of net assets acquired, including other definite-
lived intangible assets. Goodwill is reviewed for impairment annually in the fourth quarter or when an interim triggering event
has occurred indicating potential impairment. The Company has concluded that it has one operating segment and one reporting
unit. The Company tests for goodwill impairment on its reporting unit.
72
SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except for per share data or unless otherwise noted)
During the Company’s qualitative assessment, the Company makes significant estimates, assumptions, and judgments,
around the financial performance of the Company, changes in share price, and forecasts of earnings, working capital
requirements, and cash flows. The Company considers each reporting unit's historical results and operating trends as well as any
strategic difference from the Company’s historical results when determining these assumptions.
The Company can opt to perform a qualitative assessment to test a reporting unit’s goodwill for impairment or the
Company can directly perform the quantitative impairment test. If the Company determines that the fair value of a reporting
unit is more likely than not to be less than its carrying amount, a quantitative impairment test is performed.
Fair value estimates used in the quantitative impairment test are calculated using a combination of the income and market
approaches. The income approach is based on the present value of future cash flows of each reporting unit, while the market
approach is based on certain multiples of selected guideline public companies or selected guideline transactions. The
approaches incorporate a number of market participant assumptions including future growth rates, discount rates, income tax
rates and market activity in assessing fair value and are reporting unit specific. If the carrying amount exceeds the reporting
unit's fair value, the Company recognizes an impairment charge for the amount by which the carrying amount exceeds the
reporting unit's fair value.
The fair value measurement associated with the quantitative goodwill impairment test is based on significant inputs that are
not observable in the market and thus represents a Level 3 measurement. Significant changes in the underlying assumptions
used to value goodwill could significantly increase or decrease the fair value estimates used for impairment assessments.
In order to assess the reasonableness of the estimated fair value of the Company’s reporting unit, the Company compares
the aggregate reporting unit fair value to the Company’s market capitalization on an overall basis and calculates an implied
control premium (the excess of the sum of the reporting units’ fair value over the Company’s market capitalization on an
overall basis). The Company evaluates the control premium by comparing it to observable control premiums from recent
comparable transactions. If the implied control premium is determined to not be reasonable in light of these recent transactions,
the Company re-evaluates its reporting unit fair values, which may result in an adjustment to the discount rate and/or other
assumptions.
This re-evaluation could result in a change to the estimated fair value of the reporting unit. If the fair value of a reporting
unit exceeds the carrying amount of the net assets assigned to that reporting unit, goodwill is not impaired.
If the fair value of the reporting unit is less than its carrying amount, goodwill is impaired and the excess of the reporting
unit’s carrying value over the fair value is recognized as an impairment loss.
Impairment of Long-Lived Assets
A review of long-lived assets for impairment is performed when events or changes in circumstances indicate that the
carrying value of such assets may not be recoverable. If an indication of impairment is present, the Company compares the
estimated undiscounted future cash flows to be generated by the asset to the asset’s carrying amount. If the undiscounted future
cash flows are less than the carrying amount of the asset, the Company records an impairment loss equal to the amount by
which the asset’s carrying amount exceeds its fair value. The fair value is determined based on valuation techniques such as a
comparison to fair values of similar assets or using a discounted cash flow analysis.
This fair value measurement is based on significant inputs that are not observable in the market and thus represents a Level
3 measurement. Significant changes in the underlying assumptions used to value long lived assets could significantly increase
or decrease the fair value estimates used for impairment assessments.
Long lived assets that do not have indefinite lives are amortized/depreciated over their useful lives and reviewed for
impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable.
The Company reevaluates the useful life determinations each year to determine whether events and circumstances warrant a
revision to the remaining useful lives.
73
SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except for per share data or unless otherwise noted)
Leases
Whenever the Company enters into a new arrangement, it must determine, at the inception date, whether the arrangement
contains a lease. This determination generally depends on whether the arrangement conveys to the Company the right to control
the use of an explicitly or implicitly identified fixed asset for a period of time in exchange for consideration. Control of an
underlying asset is conveyed to the Company if the Company obtains the rights to direct the use of and to obtain substantially
all of the economic benefits from using the underlying asset.
If a lease exists, the Company must then determine the separate lease and non-lease components of the arrangement. Each
right to use an underlying asset conveyed by a lease arrangement should generally be considered a separate lease component if
it both: (i) can benefit the Company without depending on other resources not readily available to the Company and (ii) does
not significantly affect and is not significantly affected by other rights of use conveyed by the lease. Aspects of a lease
arrangement that transfer other goods or services to the Company but do not meet the definition of lease components are
considered non-lease components. The consideration owed by the Company pursuant to a lease arrangement is generally
allocated to each lease and non-lease component for accounting purposes. However, the Company has elected to not separate
lease and non-lease components. Each lease component is accounted for separately from other lease components, but together
with the associated non-lease components.
For each lease, the Company must then determine:
•
•
•
The lease term - The lease term is the period of the lease not cancellable by the Company, together with
periods covered by: (i) renewal options the Company is reasonably certain to exercise or that are controlled
by the lessor and (ii) termination options the Company is reasonably certain not to exercise.
The present value of lease payments is calculated based on:
–
Lease payments - Lease payments include certain fixed and variable payments, less lease incentives,
together with amounts probable of being owed by the Company under residual value guarantees and, if
reasonably certain of being paid, the cost of certain renewal options and early termination penalties set forth
in the lease arrangement. Lease payments exclude consideration that is: (i) not related to the transfer of goods
and services to the Company and (ii) allocated to the non-lease components in a lease arrangement, except for
the classes of assets where the Company has elected to not separate lease and non-lease components.
– Discount rate - The discount rate must be determined based on information available to the Company
upon the commencement of a lease. Lessees are required to use the rate implicit in the lease whenever such
rate is readily available; however, as the implicit rate in the Company's leases is generally not readily
determinable, the Company generally uses the hypothetical incremental borrowing rate it would have to pay
to borrow an amount equal to the lease payments, on a collateralized basis, over a timeframe similar to the
lease term.
Lease classification - In making the determination of whether a lease is an operating lease or a finance lease,
the Company considers the lease term in relation to the economic life of the leased asset, the present value of
lease payments in relation to the fair value of the leased asset and certain other factors, including the lessee's
and lessor's rights, obligations and economic incentives over the term of the lease.
Generally, upon the commencement of a lease, the Company will record a lease liability and a right-of-use (ROU) asset.
However, the Company has elected, for certain classes of underlying assets with initial lease terms of twelve months or less
(known as short-term leases), to not recognize a lease liability or ROU asset. Lease liabilities are initially recorded at lease
commencement as the present value of future lease payments. ROU assets are initially recorded at lease commencement as the
initial amount of the lease liability, together with the following, if applicable: (i) initial direct costs and (ii) lease payments
made, net of lease incentives received, prior to lease commencement.
74
SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except for per share data or unless otherwise noted)
Over the lease term, the Company generally increases its lease liabilities using the effective interest method and decreases
its lease liabilities for lease payments made. The Company generally amortizes its ROU assets over the shorter of the estimated
useful life or the lease term and assesses its ROU assets for impairment, similar to other long-lived assets.
For finance leases, amortization expense and interest expense are recognized separately in the Consolidated Statements of
Operations, with amortization expense generally recorded on a straight-line basis and interest expense recorded using the
effective interest method. For operating leases, a single lease cost is generally recognized in the Consolidated Statements of
Operations on a straight-line basis over the lease term. Lease costs for short-term leases not recognized in the Consolidated
Balance Sheets are recognized in the Consolidated Statements of Operations and are expensed as incurred. Variable lease costs
not initially included in the lease liability and ROU asset impairment charges are expensed as incurred.
Income Taxes
In March 2020, in response to the COVID-19 pandemic, the Coronavirus Aid, Relief and Economic Security Act (“CARES
Act”) was signed into law. The CARES Act provides numerous tax provisions and other stimulus measures, including
temporary changes regarding the prior and future utilization of net operating losses. The CARES Act amends the Net Operating
Loss provisions of the Tax Cuts and Jobs Act, allowing for the carryback of losses arising in tax years 2018, 2019 and 2020, to
each of the five taxable years preceding the taxable year of loss.
Since we conduct operations on a global basis, our effective tax rate has and will depend upon the geographic distribution
of our pre-tax earnings among locations with varying tax rates. We account for the effects of income taxes that result from our
activities during the current and preceding years. Under this method, deferred income tax liabilities and assets are based on the
difference between the financial statement carrying amounts and the tax basis of assets and liabilities using enacted tax rates in
effect in the years in which the differences are expected to reverse or be utilized. The realization of deferred tax assets is
contingent upon the generation of future taxable income. A valuation allowance is recorded if it is “more likely than not” that a
portion or all of a deferred tax asset will not be realized.
In evaluating our ability to recover our deferred tax assets within the jurisdiction from which they arise, we consider all
available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable
income, tax-planning strategies, and results of recent operations. In projecting future taxable income, we begin with historical
results and incorporate assumptions including the amount of future state, federal and foreign pretax operating income, the
reversal of temporary differences, and the implementation of feasible and prudent tax-planning strategies. These assumptions
require significant judgment about the forecasts of future taxable income and are consistent with the plans and estimates we are
using to manage the underlying businesses.
We recognize a tax benefit from an uncertain tax position only if it is more likely than not to be sustained upon
examination based on the technical merits of the position. The amount of the accrual for which an exposure exists is measured
by determining the amount that has a greater than 50 percent likelihood of being realized upon the settlement of the position.
Components of the reserve are classified as current or a long-term liability in the Consolidated Balance Sheets based on when
we expect each of the items to be settled. We record interest and penalties accrued in relation to uncertain tax benefits as a
component of interest expense.
While we believe we have identified all reasonably identifiable exposures and that the reserve we have established for
identifiable exposures is appropriate under the circumstances, it is possible that additional exposures exist and that exposures
may be settled at amounts different than the amounts reserved. It is also possible that changes in facts and circumstances could
cause us to either materially increase or reduce the carrying amount of our tax reserves. In general, tax returns for the year 2018
and thereafter are subject to future examination by tax authorities. Additionally, to the extent we utilize our NOL carryforwards
in the future, the tax years in which the attribute was generated may still be adjusted upon examination by the tax authorities in
the future period when the attribute is utilized.
Our policy has been to leave our cumulative unremitted foreign earnings invested indefinitely outside the United States,
and we intend to continue this policy. Although distributions to the U.S. are generally not subject to U.S. federal taxes, the
Company continues to assert permanent reinvestment of foreign earnings. Due to the timing and circumstances of repatriation
of such earnings, if any, it is not practicable to determine the unrecognized deferred tax liability relating to such amounts.
75
SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except for per share data or unless otherwise noted)
Foreign Currency Exchange
The functional currency of non-U.S. entities is translated into U.S. dollars for balance sheet accounts using the month end
rates in effect as of the balance sheet date and average exchange rate for revenue and expense accounts for each respective
period. The translation adjustments are deferred as a separate component of stockholders’ equity within accumulated other
comprehensive income.
Gains or losses resulting from transactions denominated in foreign currencies are included in other income or expense,
within the Consolidated Statements of Operations and were as follows:
Year Ended December 31,
2023
2022
2021
Net (loss) gain on foreign currency translations
$
(5,131) $
2,835 $
(5,839)
Comprehensive Income (Loss)
Reporting on comprehensive income requires components of other comprehensive income, including unrealized gains or
losses on available-for-sale securities, to be included as part of total comprehensive income. Comprehensive income is
comprised of net income, translation adjustments and unrealized gains and losses on available-for-sale securities. The
components of comprehensive income are included in the Consolidated Statements of Comprehensive (Loss) Income.
Basic and Diluted Net Income Attributable to Common Stockholders per Common Share
Basic EPS is computed based upon the weighted average number of common shares outstanding for the year, excluding
amounts associated with restricted shares.
Diluted EPS is computed based upon the weighted average number of common shares outstanding for the year plus the
potential dilutive effect of common stock equivalents using the treasury stock method and the average market price of the
Company’s common stock for the year. The potential dilutive effect of common stock includes stock options, convertible debt
and unvested restricted stock. The dilutive effects of stock options and restricted stock awards are based on the treasury stock
method. The dilutive effect of the assumed conversion of convertible debt is determined using the if-converted method. The
after-tax effect of interest expense related to the convertible securities is added back to net income, and the convertible debt is
assumed to have been converted into common shares at the beginning of the period.
The Company includes participating securities (Redeemable Convertible Preferred Stock - Participation with Dividends on
Common Stock that contain preferred dividend) in the computation of EPS pursuant to the two-class method. The two-class
method of computing earnings per share is an allocation method that calculates earnings per share for common stock and
participating securities. During periods of net loss, no effect is given to the participating securities because they do not share in
the losses of the Company.
Stock-Based Compensation
As of December 31, 2023, the Company maintains two stock-based compensation plans.
The Company utilizes the Black-Scholes pricing model to determine the fair value of stock options on the dates of grant.
Restricted stock awards are measured based on the fair market values of the underlying stock on the dates of grant. The
Company recognizes stock-based compensation over the requisite service period with an offsetting credit to additional paid-in
capital.
For the Company’s performance restricted stock awards and units, the Company estimates the number of shares the
recipient is to receive by applying a probability of achieving the performance goals. The actual number of shares the recipient
receives is determined at the end of the performance period based on the results achieved versus goals based on the
76
SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except for per share data or unless otherwise noted)
performance targets, such as revenues and earnings before interest, tax, depreciation and amortization (“EBITDA”) after certain
adjustments, and Total Shareholder Return (TSR). The compensation cost is recognized using straight line method over the
requisite service period for each vesting tranche. Performance based stock awards are measured at the closing stock price on the
grant date and are recognized straight line over the requisite service period. Performance based cash units are measured at the
closing stock price at the reporting period end date and are recognized straight line over the requisite service period.
Use of a valuation model requires management to make certain assumptions with respect to selected model inputs.
Expected volatility was calculated based on historical information of the Company’s stock. The average expected life was
determined using historical stock option exercise activity. The risk-free interest rate is based on U.S. Treasury zero-coupon
issues with a remaining term equal to the expected life assumed at the date of grant. The Company has never declared or paid
cash dividends on the common equity and does not anticipate paying any cash dividends on the common equity in the
foreseeable future. Forfeitures are accounted for as they occur.
Segment and Geographic Information
The Company’s chief operating decision-maker is the Chief Executive Officer. The Company operates and offers various
products in North America, Europe and Asia-Pacific with the majority of the Company’s revenue and assets in the U.S. The
Company assessed its current structure and operations and determined it has one reportable segment as the business is managed
and assessed by the chief operating decision-maker based on the consolidated results of the organization.
Revenues by geography are based on the billing addresses of the Company’s customers. The following tables set forth
revenue and property and equipment, net by geographic area:
Revenue:
Domestic
Foreign
Total revenue
Property and equipment, net:
Domestic
Foreign
Total property and equipment, net
Year Ended December 31,
2023
2022
2021
$
$
151,882 $
164,255 $
178,221
12,314
9,501
11,121
164,196 $
173,756 $
189,342
Year Ended December 31,
2023
2022
$
$
2,570 $
1,103
3,673 $
2,996
1,445
4,441
77
SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except for per share data or unless otherwise noted)
Note 3. Revenue
Disaggregation of revenue
The Company disaggregates revenue from contracts with customers into the nature of the products and services and
geographical regions. The Company’s geographic regions are the Americas, Europe, the Middle East and Africa (“EMEA”),
and Asia Pacific (“APAC”). The majority of the Company’s revenue is from the TMT sector.
Geography:
Americas
APAC
EMEA
Total
Service Line:
Professional Services
Transaction Services
Subscription Services
License
Total
Year Ended December 31, 2023
Cloud
NetworkX1
Messaging2
Total
$
149,901 $
790 $
1,191 $
151,882
5,078
7,236
—
—
—
—
5,078
7,236
$
162,215 $
790 $
1,191 $
164,196
$
18,004 $
— $
(68) $
17,936
185
143,430
596
—
790
—
—
1,259
—
185
145,479
596
$
162,215 $
790 $
1,191 $
164,196
78
SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except for per share data or unless otherwise noted)
Geography:
Americas
APAC
EMEA
Total
Service Line:
Professional Services
Transaction Services
Subscription Services
License
Total
Geography:
Americas
APAC
EMEA
Total
Service Line:
Professional Services
Transaction Services
Subscription Services
License
Total
_____________________________
Year Ended December 31, 2022
Cloud
NetworkX1
Messaging2
Total
$
155,296 $
5,748 $
3,211 $
164,255
1,470
6,565
(28)
1,494
—
—
1,442
8,059
$
163,331 $
7,214 $
3,211 $
173,756
$
14,278 $
1,838 $
894 $
17,010
858
148,195
—
31
5,097
248
—
2,022
295
889
155,314
543
$
163,331 $
7,214 $
3,211 $
173,756
Year Ended December 31, 2021
Cloud
NetworkX1
Messaging2
Total
$
158,283 $
18,279 $
1,659 $
178,221
485
7,213
186
3,237
—
—
671
10,450
$
165,981 $
21,702 $
1,659 $
189,342
$
15,131 $
6,709 $
1,385 $
5,851
142,636
2,363
50
14,943
—
—
274
—
23,225
5,901
157,853
2,363
$
165,981 $
21,702 $
1,659 $
189,342
1
2
Includes revenue associated with DXP and Activation contracts divested in the prior period, as well as residual NetworkX contracts
recognized in the current and prior periods.
Includes revenue recognized in the current and prior periods associated with residual Messaging contracts.
Trade Accounts Receivable and Contract balances
The Company classifies its right to consideration in exchange for deliverables as either a receivable or a contract asset. A
receivable is a right to consideration that is unconditional (i.e. only the passage of time is required before payment is due). For
example, the Company recognizes a receivable for revenues related to its time and materials and transaction or volume-based
contracts. The Company presents such receivables in Trade accounts receivable, net in its consolidated statements of financial
position at their net estimated realizable value. The Company maintains an allowance for credit losses to provide for the
estimated amount of receivables that may not be collected. The allowance is based upon an assessment of customer
creditworthiness, historical payment experience, the age of outstanding receivables and other applicable factors.
79
SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except for per share data or unless otherwise noted)
A contract asset is a right to consideration that is conditional upon factors other than the passage of time. For example, the
Company would record a contract asset if it records revenue on a professional services engagement but are not entitled to bill
until the Company achieves specified milestones. Contract asset balance at December 31, 2023 and 2022 was $1.2 million and
$13.3 million, respectively.
Amounts collected in advance of services being provided are accounted for as contract liabilities, which are presented as
deferred revenue on the accompanying balance sheet and are realized with the associated revenue recognized under the
contract. Nearly all of the Company's contract liabilities balance is related to services revenue, primarily subscription services
contracts.
The Company’s contract assets and liabilities are reported in a net position on a customer basis at the end of each reporting
period.
Significant changes in the contract liabilities balance (current and noncurrent) during the period are as follows:
Balance - January 1, 2023
Revenue recognized in the period
Amounts billed but not initially recognized as revenue
Balance - December 31, 2023
_____________________________
Contract
Liabilities1
$
$
1,948
(164,378)
163,525
1,095
1
Comprised of Deferred Revenue. $1.9 million of revenue recognized in the period was included in the contract liability balance at the
beginning of the period.
Revenues recognized during the year ended December 31, 2023 for performance obligations satisfied or partially satisfied
in previous periods were immaterial.
Contract acquisition costs
In connection with the adoption of Topic 606 and the related cost accounting guidance under Accounting Standards
Codification (“ASC”) 340, the Company is required to capitalize certain contract acquisition costs consisting primarily of
commissions and bonuses paid when contracts are signed. For contracts that have a duration of less than one year, the Company
follows a Topic 606 practical expedient and expenses these costs over the estimated customer life, because it does not pay
commissions upon renewals that are commensurate with the initial contract. During the years ended December 31, 2023, 2022
and 2021 the amounts of amortization were not material and there were no impairments in relation to costs capitalized.
Contract Fulfillment Costs
Under ASC 340-40, the Company evaluates whether or not it should capitalize the costs of fulfilling a contract. Such costs
would be capitalized when they are not within the scope of other standards and: (1) are directly related to a contract; (2)
generate or enhance resources that will be used to satisfy performance obligations; and (3) are expected to be recovered. As of
December 31, 2023 and 2022, the Company had $0.2 million and nil of capitalized contract fulfillment costs, respectively.
80
SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except for per share data or unless otherwise noted)
Transaction price allocated to the remaining performance obligations
Topic 606 requires that the Company disclose the aggregate amount of transaction price that is allocated to performance
obligations that have not yet been satisfied as of December 31, 2023. The Company has elected not to disclose transaction price
allocated to remaining performance obligations for:
1. Contracts with an original duration of one year or less, including contracts that can be terminated for convenience
without a substantive penalty;
2. Contracts for which the Company recognizes revenues based on the right to invoice for services performed;
3. Variable consideration allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied
promise to transfer a distinct good or service that forms part of a single performance obligation in accordance with
Topic 606 Section 10-25-14(b), for which the criteria in Topic 606 Section 10-32-40 have been met. This applies to a
limited number of situations where the Company is dependent upon data from a third party or where fees are highly
variable.
Many of the Company’s performance obligations meet one or more of these exemptions. Specifically, the Company has
excluded the following from the Company’s remaining performance obligations, all of which will be resolved in the period in
which amounts are known:
•
•
•
consideration for future transactions, above any contractual minimums;
consideration for success-based transactions contingent on third-party data;
credits for failure to meet future service level requirements.
As of December 31, 2023, the aggregate amount of transaction price allocated to remaining performance obligations, other
than those meeting the exclusion criteria above, was $231.9 million, of which approximately 57.3% is expected to be
recognized as revenues within 2 years, and the remainder thereafter.
Estimates of revenue expected to be recognized in future periods also exclude unexercised customer options to purchase
services that do not represent material rights to the customer. Customer options that do not represent a material right are only
accounted for in accordance with Topic 606 when the customer exercises its option to purchase additional goods or services.
Note 4. Divestitures and Discontinued Operations
Discontinued Operations
Messaging and NetworkX Businesses Sale
On October 31, 2023 (the “Closing Date”), Synchronoss Technologies, Inc. and certain of its affiliated entities (such
entities, together with the Company, the “Company Group”) entered into an Asset Purchase Agreement (the “Agreement”) with
Lumine Group Software Solutions (Ireland) Limited, a private limited company incorporated under the laws of Ireland, Lumine
Group UK Holdco Ltd, Incognito Software Systems Inc., Lumine Group US Holdco, Inc., Lumine Group Australia Holdco Pty
Ltd, Openwave Messaging (Ireland) Limited, Razersight Software Solutions Ireland Limited, Spatial Software Solutions Ireland
Limited, Razorsight Software Solutions US Inc., and Openwave Messaging US Inc. (such entities, the “Buyer”), pursuant to
which the Company Group sold its Messaging and NetworkX businesses (the “Messaging and NetworkX Businesses”) to Buyer
(the “Transaction”) for a total purchase price of up to $41,800,000 (the “Purchase Price”), and Buyer assumed certain liabilities
of the Messaging and Digital Businesses. Lumine Group Inc., the parent entity of Lumine Group Software Solutions (Ireland)
Limited, guaranteed certain obligations of Buyer under the Agreement pursuant to a separate Limited Guaranty, by and between
Lumine Group Inc. and the Company, dated as of the date of the Agreement. The Purchase Price, which is subject to set-off
rights in certain circumstances and certain adjustments, is payable as follows: (i) $31,300,000 (as adjusted) was paid in cash to
the Company on the Closing Date, (ii) an additional $7,200,000 was deposited by Buyer into an escrow account on the Closing
Date (which amount will remain in escrow until reconciliation of a net tangible asset adjustment), with any amounts in such
escrow account to be released from escrow to either Buyer or the Company, based on whether such reconciliation indicates a
deficit or a surplus in net tangible assets relative to a negotiated target amount, following such reconciliation process, which
could take in excess of 150 days following the Closing Date for the initial portion of the net tangible asset reconciliation and
300 days or more following the Closing Date for reconciliation of certain specified assets to be completed, (iii) an additional
81
SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except for per share data or unless otherwise noted)
$300,000 in cash (which amount was not deposited into an escrow account) may become payable to the Company in
accordance with the terms of the Agreement in the event that the voluntary disclosure process with respect to certain sales tax
matters related to the Messaging and NetworkX Businesses are resolved by the Company within 9 months following the
Closing Date, and (iv) an additional amount of up to $3,000,000 in cash (which amount was not deposited into an escrow
account) may become payable to the Company as an earn-out based on the achievement of specified gross revenue targets for
the Messaging and NetworkX Businesses in fiscal year 2023. Pursuant to the Certificate of Designations of the Series B
Perpetual Non-Convertible Preferred Stock, on November 3, 2023 the Company redeemed 9,874 shares of its outstanding
Series B Preferred Stock by using $10,000,000 of the Purchase Price, of which $9.9 million was related to principal and
$0.1 million was related to accrued dividend.
This transaction represents a strategic shift designed to maximize shareholder value and allow the Company to solely focus
on providing cloud-centric solutions. In connection with the sale transaction, the Company determined its Messaging and
NetworkX Businesses qualified for discontinued operations accounting treatment in accordance with ASC 205-20. The
Company allocated $28.6 million goodwill to the transaction using level 3 estimates, and recognized a loss on divestiture of
$16.4 million reported in Loss on divestiture in the Consolidated Statements of Operations.
The following tables set forth details of net income from discontinued operations for the years ended December 31, 2023,
2022 and 2021, related to Messaging and NetworkX Businesses sale.
Net revenues
Costs and expenses:
Cost of revenues1
Research and development
Selling, general and administrative
Restructuring charges
Depreciation and amortization
Total costs and expenses
(Loss) income from operations
Interest income
Interest expense
Other (expense) income, net
(Loss) income from operations, before taxes
Loss on divestiture
Provision for income taxes
Net loss
_____________________________
Year Ended December 31,
2022
2021
2023
$
55,409 $
78,872 $
91,273
29,979
5,967
11,061
3
10,518
57,528
(2,119)
8
—
(89)
(2,200)
(16,382)
(1,935)
45,202
6,022
9,173
462
16,997
77,856
1,016
12
(1)
(106)
921
—
(1,918)
$
(20,517) $
(997) $
48,890
4,526
10,772
1,505
18,834
84,527
6,746
1
(9)
39
6,777
—
(1,610)
5,167
1
Cost of revenues excludes depreciation and amortization which are shown separately.
82
SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except for per share data or unless otherwise noted)
There were no assets and liabilities related to discontinued operations as of December 31, 2023, as all balances were
transferred to Lumine Group upon sale. The following table presents the major classes of assets and liabilities of our
discontinued operations related to Messaging and NetworkX Businesses sale.
December 31,
2023
2022
Current assets of discontinued operations:
Cash and cash equivalents
Accounts receivable, net
Prepaid & other current assets
Total current assets of discontinued operations
Non-current assets of discontinued operations:
Property and equipment, net
Operating lease right-of-use assets
Goodwill
Intangible assets, net
Other assets, non-current
Total non-current assets of discontinued operations
Total assets of discontinued operations
Current liabilities of discontinued operations:
Accounts payable
Accrued expenses
Deferred revenues, current
Total current liabilities of discontinued operations
Non-current liabilities of discontinued operations:
Deferred revenues, non-current
Leases, non-current
Other non-current liabilities
Total non-current liabilities of discontinued operations
Total liabilities of discontinued operations
$
— $
$
$
—
—
—
—
—
—
—
—
—
— $
— $
—
—
—
—
—
—
—
3,611
15,339
3,344
22,294
141
757
28,630
25,180
28
54,736
77,030
4,509
7,802
11,910
24,221
324
493
1,237
2,054
$
— $
26,275
83
SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except for per share data or unless otherwise noted)
The following table summarizes the significant non-cash items and capital expenditures of the discontinued operations that
are included in the consolidated statements of cash flows for the years ended December 31, 2023, 2022 and 2021:
Operating activities:
Depreciation and amortization
Stock-based compensation
Loss on divestiture
Investing activities:
Additions to capitalized software
Proceeds from divestiture1
Year Ended December 31,
2022
2023
2021
$
10,517 $
16,997 $
763
16,382
997
—
18,834
1,744
—
$
(4,497) $
(5,809) $
(11,188)
23,674
—
—
_____________________________
1
The Company received $31.3 million in cash proceeds from the sale of the Messaging and NetworkX, which was offset by
$0.4 million of assumed transaction expenses and $7.2 million of operating cash on the divested entities. Total consideration for the
sale also included $1.5 million of estimated deferred consideration, in addition to the cash received.
Divestitures
Digital Experience Platform and Activation Solutions Sale
On March 7, 2022, Synchronoss Technologies, Inc. and iQmetrix Global Ltd. (“iQmetrix ”), entered into an Asset Purchase
Agreement, pursuant to which Synchronoss has agreed to sell its Digital Experience Platform and activation solutions (the
“DXP Business”) to iQmetrix for up to a total purchase price of $14 million. The purchase price is payable as follows: (i)
$7.5 million on the closing date of the Transaction, (ii) $0.5 million deposited into an escrow account on the Closing Date, (iii)
$1 million paid twelve (12) months from the Closing Date, and (iv) $5 million that may be payable as an earn-out.
This transaction closed on May 11, 2022. The Company received the $7.5 million cash payment on the transaction close
date. The Company received the $0.5 million payment in escrow during the third quarter of 2022 in accordance with the terms
of the Asset Purchase Agreement. The remaining $1 million escrow payment has not been received by the Company in
accordance with the agreement. As of December 31, 2023 the Company fully reserved for the asset and related receivables
recorded within the Selling, general and administrative expenses line item on the Consolidated Statements of Income, and is
pursuing collection of the payment.
As of the close of the transaction, the Company determined the fair value of the earn-out provision was $3.6 million of
which $3.0 million was recorded as an other current asset and the remaining portion was recorded as non-current other asset. In
the fourth quarter of fiscal 2022, iQmetrix and the Company agreed that the required performance conditions were not met.
This resulted in a write-off of the earn-out provision recorded within the Selling, general and administrative expenses line item
on the Consolidated Statements of Operations.
The book value of the divested intangible assets associated with the DXP Business was $2.3 million. For the goodwill
allocation, the fair value of the Core reporting unit was estimated using a combination of the income approach, which
incorporates the use of the discounted cash flow method, and the market approach, which incorporates the use of earnings and
revenue multiples based on market data. Based on the fair value of the Core reporting unit and the aggregate consideration
received in the transaction, the Company determined the attributable fair value of goodwill to the DXP Business was
$7.6 million. The transaction resulted in a $2.5 million gain for the year ended December 31, 2022.
Note 5. Accounts Receivable Securitization Facility
On June 23, 2022 (the “Closing Date”), the Company and certain of its subsidiaries (together with the Company, the
“Company Group”) entered into a $15 million accounts receivable securitization facility (the “A/R Facility”) with
Norddeutsche Landesbank Girozentrale.
84
SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except for per share data or unless otherwise noted)
The A/R Facility transaction includes (i) Receivables Purchase Agreements (the “Receivables Purchase Agreements”)
dated as of the Closing Date, among the Company, as initial servicer, SN Technologies, LLC, a wholly owned special purpose
subsidiary of the Company (“SN Technologies”), as seller, Norddeutsche Landesbank Girozentrale, as administrative agent (the
“Administrative Agent”), and the purchasers party thereto, the group agents party thereto and the originators party thereto; (ii)
Purchase and Sale Agreements (the “Purchase and Sale Agreements”) dated as of the Closing Date, between the Company
Group, as originators (the “Originators”), and SN Technologies, as purchaser; (iii) the Administration Agreement (the
“Administration Agreement”) dated as of the Closing Date, between the Company, as servicer, and Finacity Corporation, as
administrator; and (iv) the Performance Guaranty (the “Performance Guaranty”) dated as of the Closing Date made by the
Company in favor of the Administrative Agent.
Pursuant to the Purchase and Sale Agreements, the Originators will sell existing and future accounts receivable (and related
assets) (the “Receivables”) to SN Technologies in exchange for cash and/or subordinated notes. The Originators and SN
Technologies intend the transactions contemplated by the Purchase and Sale Agreements to be true sales to SN Technologies by
the respective Originators. Pursuant to the Receivables Purchase Agreement, SN Technologies will in turn grant an undivided
security interest to the Administrative Agent in the Receivables in exchange for a credit facility permitting borrowings of up to
$15 million outstanding from time to time. Yield is payable to the Administrative Agent under the Receivables Purchase
Agreements at a variable rate based on the Norddeutsche Landesbank Girozentrale’s Hanover funding rate plus a 2.35%
margin. The Company’s commitment fee shall equal 0.85% per annum on the average daily unused outstanding capital.
Pursuant to the Performance Guaranty, the Company guarantees the performance of the Originators of their obligations under
the Purchase and Sale Agreements.
The Company has not agreed to guarantee any obligations of SN Technologies or the collection of any of the receivables
and will not be responsible for any obligations to the extent the failure to perform such obligations by the Company or any
Originators results from receivables being uncollectible on account of the insolvency, bankruptcy or lack of creditworthiness or
other financial inability to pay of the related obligor.
Unless earlier terminated or subsequently extended pursuant to the terms of the Receivables Purchase Agreement, the A/R
Facility will expire on June 23, 2025.
The foregoing description of the A/R Facility and the respective transactions contemplated thereby does not purport to be
complete and is qualified in its entirety by reference to the full text of the Receivables Purchase Agreements, Purchase and Sale
Agreements, Administration Agreement and Performance Guaranty, copies of which are filed as Exhibits 10.1, 10.2, 10.3 and
10.4, respectively, on Form 8-K filed with Securities and Exchange Commission on June 23, 2022.
The Company drew $12.0 million on the A/R Facility in 2023, and had repaid the balance in 2023. The interest associated
with the draw and repayment was not material for the period. The draw down and subsequent repayment of the A/R Facility
represent financing activity, as reported in the Statement of Cash Flows. As of December 31, 2023 approximately $8.5 million
of the Company’s receivables are held by SN Technologies. As of December 31, 2023 there were no outstanding borrowings
against the A/R facility and $5.6 million was available for the Company to draw under the A/R Facility.
Note 6. Allowance for Credit Losses
The accounts receivable balance on the Company’s Consolidated Balance Sheets as of December 31, 2023 was $23.5
million, net of $0.1 million of allowances. Changes in the allowance were not material for the year ended December 31, 2023.
The following table provides a roll-forward of the allowance for credit losses that is deducted from the amortized cost basis of
trade accounts receivable to present the net amount expected to be collected:
Balance at December 31, 2022
Current period change for expected credit losses
Balance at December 31, 2023
Allowance for
credit losses
$
$
51
57
108
85
SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except for per share data or unless otherwise noted)
Note 7. Fair Value Measurements
In accordance with accounting principles generally accepted in the United States, fair value is defined as the price that
would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the
measurement date. A three-level hierarchy prioritizes the inputs used to measure fair value as follows:
•
•
•
Level 1 - Observable inputs - quoted prices in active markets for identical assets and liabilities;
Level 2 - Observable inputs other than the quoted prices in active markets for identical assets and liabilities includes quoted
prices for similar instruments, quoted prices for identical or similar instruments in inactive markets, and amounts derived
from valuation models where all significant inputs are observable in active markets; and
Level 3 - Unobservable inputs - includes amounts derived from valuation models where one or more significant inputs are
unobservable and require the Company to develop relevant assumptions.
The Company had $24.6 million and $18.3 million of cash and cash equivalents as of December 31, 2023 and 2022
respectively. The company had $12.5 million and nil in money market accounts, measured as Level 1 inputs as of December 31,
2023 and 2022, respectively.
Note 8. Note receivable
Sequential Technology International, LLC
During the second quarter of 2020, the Company entered into an agreement with Sequential Technology International, LLC
(“STIN”) and AP Capital Holdings II, LLC (“APC”) to divest its remaining equity interest in STIN as well as settle its paid-in-
kind purchase money note (“PIK note”) and certain amounts due as of December 31, 2019 in consideration for a $9.0 million
secured promissory note (the “Note”). As of December 31, 2022, the carrying value of the Note after the consideration of the
allowance for credit loss was approximately $4.8 million. The Company determined the allowance on the Note using a
discounted cash flow analysis, which discounts the expected future cash flows of the asset to determine the collectible amount.
During the third quarter of 2023, the interest payment for the Note was not received by the Company from STIN. In the
third quarter of 2023 the Company reassessed the collectability of the Note and determined that a full allowance for credit
losses was required equal to the carrying value of the Note, recorded within the Selling, general and administrative expenses
line item on the Consolidated Statements of Operations. The Company will continue to pursue collection of the Note.
Note 9. Property and Equipment
Property and equipment consist of the following:
Computer hardware
Computer software
Furniture and fixtures
Finance lease assets
Leasehold improvements
Property and equipment, gross
Less: Accumulated depreciation
Property and equipment, net
December 31,
2023
2022
$
27,000 $
115,097
17,021
2,434
2,085
12,246
60,786
25,492
4,027
1,440
14,406
160,462
(57,113)
(156,021)
$
3,673 $
4,441
In fiscal 2023, the Company disposed of assets as part of the migration of hosting services for certain customers.
86
SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except for per share data or unless otherwise noted)
Depreciation expense was approximately $2.2 million, $2.9 million and $5.6 million for the year ended December 31,
2023, 2022, and 2021, respectively. Amortization of property and equipment recorded under capital leases are included in
depreciation expense.
Note 10. Goodwill and Intangibles
Goodwill
The Company records goodwill which represents the excess of the purchase price over the fair value of assets acquired,
including other definite-lived intangible assets. Goodwill is reviewed annually for impairment or upon the occurrence of events
or changes in circumstances that would more likely than not reduce the fair value of the reporting unit below its carrying
amount.
The following table shows the adjustments to goodwill during 2023 and 2022:
Balance at December 31, 2021
Goodwill allocated to the sale of DXP Business
Translation adjustments
Balance at December 31, 2022
Translation adjustments
Balance at December 31, 2023
Goodwill
$
195,947
(7,567)
(6,121)
182,259
1,649
183,908
$
$
The Company recognized no impairment charges to its goodwill for the years ended December 31, 2023, 2022, and 2021,
respectively.
In connection with the sale of the Messaging and NetworkX businesses, the Company allocated goodwill in the amount of
$28.6 million to these businesses based upon relative fair value. Such amount is excluded in all periods in the table above and
is included in discontinued operations. For additional information, see Note 4. Divestitures and Discontinued Operations of the
Notes to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K.
Other Intangible Assets
The Company’s intangible assets with definite lives consist primarily of technology, capitalized software, trade names, and
customer lists and relationships. These intangible assets are being amortized on the straight-line method over the estimated
useful lives of the assets. Amortization expense related to intangible assets for the years ended December 31, 2023, 2022 and
2021 was $14.6 million, $11.9 million and $11.5 million, respectively.
The Company includes impairment charges to its intangible assets within depreciation and amortization in its Consolidated
Statements of Operations. The Company recognized no impairment charges to its intangible assets for the years ended
December 31, 2023, 2022 and 2021 respectively.
87
SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except for per share data or unless otherwise noted)
The Company’s intangible assets consist of the following:
Technology
Customer lists and relationships
Capitalized software and patents
Trade name
Total
Technology
Customer lists and relationships
Capitalized software and patents
Trade name
Total
December 31, 2023
Accumulated
Amortization
Cost
$
52,545 $
(52,545) $
67,129
67,687
1,878
(64,387)
(48,215)
(1,878)
Net
—
2,742
19,472
—
$
189,239 $
(167,025) $
22,214
December 31, 2022
Accumulated
Amortization
Cost
$
51,343 $
(51,343) $
65,861
52,473
1,869
(62,044)
(33,934)
(1,869)
Net
—
3,817
18,539
—
$
171,546 $
(149,190) $
22,356
Estimated future amortization expense of its intangible assets for the next five years is as follows:
Year ending December 31,
2024
2025
2026
2027
2028
Thereafter
Total future amortization
Capitalized software costs in the development stage1
Total
_____________________________
$
$
11,346
4,480
743
17
17
62
16,665
5,549
22,214
1 Amounts represent capitalized software costs that are currently in the development stage. Amortization of these costs will begin once
the software projects are complete and ready for their intended use.
88
SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except for per share data or unless otherwise noted)
Note 11. Accrued Expenses
Accrued expenses consist of the following:
Accrued compensation and benefits
Accrued professional service fees
Accrued telecommunications and hosting
Accrued income taxes payable
Accrued Series B preferred dividend
Accrued operating lease liabilities
Accrued finance lease liabilities
Accrued third party tech services
Accrued 2021 8.375% Senior Notes - Interest
Accrued Sales and Use Tax
Accrued other
Total
Note 12. Leases
December 31,
2023
2022
$
17,439 $
19,073
4,587
3,101
338
2,129
5,838
562
278
1,969
1,090
1,796
3,741
1,076
597
2,298
5,202
454
202
1,969
2,401
7,301
$
39,127 $
44,314
The Company has entered into contracts with third parties to lease a variety of assets, including certain real estate,
equipment, automobiles and other assets. The Company’s leases frequently allow for lease payments that could vary based on
factors such as inflation or the degree of utilization of the underlying asset. For example, certain of the Company’s real estate
leases could require us to make payments that vary based on common area maintenance charges, insurance and other charges.
The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.
The Company is party to certain sublease arrangements, primarily related to the Company’s real estate leases, where it acts
as the lessee and intermediate lessor.
Assets under operating leases are included in Operating lease right-of-use assets, with the related short term liabilities
included in Accrued expenses and long term portion included in Leases, non-current on the Consolidated Balance Sheets.
Assets under finance leases are included in Property, plant and equipment, net, with the related short term liabilities
included in Accrued Expenses and long term portion in Leases, non-current on the Consolidated Balance Sheets.
Operating lease costs are recognized on a straight-line basis over the lease terms. Finance lease assets are amortized on a
straight-line basis over the shorter of the estimated useful lives of the assets or the lease terms.
89
SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except for per share data or unless otherwise noted)
The following table presents information about the Company's ROU assets and lease liabilities:
Operating lease assets:
Non-current operating lease ROU assets
Finance lease assets:
Equipment, net
Operating lease liabilities:
Lease liabilities, current1
Lease liabilities, non-current
Total operating lease liabilities
Finance lease liabilities:
Lease liabilities, current1
Lease liabilities, non-current
Total finance lease liabilities
________________________________
1 Amounts are included in Accrued Expenses on the Condensed Consolidated Balance Sheet.
The following table provides a roll-forward of the operating lease ROU assets:
Balance at December 31, 2021
ROU assets amortization
ROU assets impairment
Foreign exchange
Balance at December 31, 2022
ROU assets amortization
ROU assets impairment
Foreign exchange
Balance at December 31, 2023
December 31,
2023
2022
$
14,791 $
20,106
1,094
858
5,838
23,037
$
28,875 $
562
556
$
1,118 $
5,202
28,729
33,931
454
416
870
ROU Assets
$
$
$
24,428
(3,561)
(169)
(592)
20,106
(3,473)
(1,918)
76
14,791
90
SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except for per share data or unless otherwise noted)
The following table provides a roll-forward of the operating lease liabilities:
Balance at December 31, 2021
Interest expense
Cash payments
Remeasurement
Foreign exchange and Other
Balance at December 31, 2022
Interest expense
Cash payments
Foreign exchange and Other
Balance at December 31, 2023
Operating Lease
Liabilities
$
$
$
$
40,112
2,888
(7,876)
(443)
(750)
33,931
2,490
(7,717)
171
28,875
The following table presents information about lease expense and sublease income:
Finance lease cost:
Interest expense
Depreciation expense
Operating lease cost1
Other lease costs and income:
Variable lease costs1
Operating lease impairments (remeasurements), net
Sublease income1
Total net lease cost
_____________________________
Year Ended December 31,
2023
2022
2021
$
77 $
59 $
562
5,961
1,131
1,918
(3,555)
378
6,485
1,141
(274)
(2,767)
$
6,094 $
5,022 $
33
201
7,504
652
731
(3,146)
5,975
1 Amounts are included in Cost of revenues, Selling, general and administrative and/or Research and development expenses in the
Consolidated Statements of Operations, based on the function that each underlying leased asset supports.
The following table provides the undiscounted amount of future cash flows included in the Company’s lease liabilities at
December 31, 2023 for each of the five years subsequent to December 31, 2023 and thereafter, as well as a reconciliation of
such undiscounted cash flows to the Company’s lease liabilities at December 31, 2023:
2024
2025
2026
2027
2028
Total future lease payments
Less: amount representing interest
Present value of future lease payments (lease liability)
91
Operating
Leases
Finance
Leases
$
7,970 $
7,805
7,875
6,279
4,276
34,205
(5,330)
28,875 $
$
616
436
169
—
—
1,221
(103)
1,118
SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except for per share data or unless otherwise noted)
The following table provides the weighted-average remaining lease term and weighted-average discount rates for the
Company’s leases:
Weighted-average remaining lease term (years), weighted based on lease
liability balances
Finance Leases
Operating Leases
Weighted-average discount rate (percentages), weighted based on the
remaining balance of lease payments:
Finance Leases
Operating Leases
Year Ended December 31,
2022
2021
2023
2.19
4.40
2.23
5.38
2.91
6.25
9.3 %
8.0 %
7.4 %
8.0 %
6.3 %
8.3 %
The following table provides certain cash flow and supplemental noncash information related to the Company’s lease
liabilities:
Cash paid for amounts included in the measurement of lease liabilities:
Finance Leases
Operating Leases
Lease liabilities arising from obtaining right-of-use assets:
Finance Leases
Operating Leases
Note 13. Debt
Offering of 2021 Senior Notes due 2026
Year Ended December 31,
2022
2021
2023
641 $
7,717 $
424 $
231
7,876 $
10,704
787 $
— $
387 $
— $
813
137
$
$
$
$
On June 30, 2021, the Company closed its underwritten public offering of $120.0 million aggregate principal amount of
8.375% senior notes due 2026 at a par value of $25.00 per senior note (the “Senior Notes”). The offering was conducted
pursuant to an underwriting agreement (the “Notes Underwriting Agreement”) dated June 25, 2021, by and among the
Company and B. Riley Securities, Inc., as representative of the several underwriters (the “Notes Underwriters”). At the closing,
the Company issued $125.0 million aggregate principal amount of Senior Notes, inclusive of $5.0 million aggregate principal
amount of Senior Notes issued pursuant to the full exercise of the Notes Underwriters’ option to purchase additional Senior
Notes.
The Notes Underwriting Agreement contains customary representations, warranties and covenants of the Company,
customary conditions to closing, indemnification obligations of the Company and the Notes Underwriters, including for
liabilities under the Securities Act, other obligations of the parties and termination provisions.
On June 30, 2021, the Company entered into an indenture (the “Base Indenture”) and a supplemental indenture (the “First
Supplemental Indenture” and, together with the Base Indenture, the “Indenture”) with The Bank of New York Mellon Trust
Company National Association, as trustee (the “Trustee”), between the Company and the Trustee. The Indenture establishes the
form and provides for the issuance of the Senior Notes.
92
SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except for per share data or unless otherwise noted)
The Senior Notes are senior unsecured obligations of the Company and rank equally in right of payment with all of the
Company’s existing and future senior unsecured and unsubordinated indebtedness. The Senior Notes are effectively
subordinated in right of payment to all of the Company’s existing and future secured indebtedness to the extent of the value of
the assets securing such indebtedness and structurally subordinated to all existing and future indebtedness of the Company’s
subsidiaries, including trade payables. The Senior Notes bear interest at the rate of 8.375% per annum. Interest on the Senior
Notes is payable quarterly in arrears on January 31, April 30, July 31 and October 31 of each year, commencing on July 31,
2021. The Senior Notes will mature on June 30, 2026, unless redeemed prior to maturity.
The Company may, at its option, at any time and from time to time, redeem the Senior Notes for cash in whole or in part (i)
on or after June 30, 2022 and prior to June 30, 2023, at a price equal to $25.75 per Senior Note, plus accrued and unpaid interest
to, but excluding, the date of redemption, (ii) on or after June 30, 2023 and prior to June 30, 2024, at a price equal to $25.50 per
Senior Note, plus accrued and unpaid interest to, but excluding, the date of redemption, (iii) on or after June 30, 2024 and prior
to June 30, 2025, at a price equal to $25.25 per Senior Note, plus accrued and unpaid interest to, but excluding, the date of
redemption, and (iv) on or after June 30, 2025 and prior to maturity, at a price equal to 100% of their principal amount, plus
accrued and unpaid interest to, but excluding, the date of redemption. On and after any redemption date, interest will cease to
accrue on the redeemed Senior Notes.
The Indenture contains customary events of default and cure provisions. If an uncured default occurs and is continuing, the
Trustee or the holders of at least 25% of the principal amount of the Senior Notes may declare the entire amount of the Senior
Notes, together with accrued and unpaid interest, if any, to be immediately due and payable. In the case of an event of default
involving the Company’s bankruptcy, insolvency or reorganization, the principal of, and accrued and unpaid interest on, the
principal amount of the Senior Notes, together with accrued and unpaid interest, if any, will automatically, and without any
declaration or other action on the part of the Trustee or the holders of the Senior Notes, become due and payable.
On October 25, 2021, the Company entered into an At Market Issuance Sales Agreement (the “Sales Agreement”) between
the Company and B. Riley Securities, Inc. (the “Agent”), a related party, pursuant to which the Company may offer and sell,
from time to time, up to $18.0 million of the Company’s 8.375% Senior Notes due 2026. Sales of the additional Senior Notes
pursuant to the Sales Agreement, if any, may be made in transactions that are deemed to be “at the market offerings” as defined
in Rule 415 under the Securities Act of 1933, as amended (the “Securities Act”). Under the Sales Agreement, the Agent will be
entitled to compensation of 2.0% of the gross proceeds of all notes sold through it as the Company’s agent.
93
SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except for per share data or unless otherwise noted)
During the fourth quarter of 2021, the Company sold an additional $16.1 million aggregate principal amount of Senior
Notes pursuant to the Sales Agreement. The additional Senior Notes sold have terms identical to the initial Senior Notes and are
fungible and vote together with, the initial Senior Notes. The Senior Notes are listed and trade on The Nasdaq Global Market
under the symbol “SNCRL.”
The carrying amounts of the Company’s borrowings were as follows:
Senior Notes
2021 Non-convertible 8.375% Senior Notes due 2026
Unamortized discount and debt issuance cost
Carrying value of Senior Notes
December 31,
2023
2022
$
$
141,077 $
141,077
(4,862)
(6,493)
136,215 $
134,584
________________________________
1
Debt issuance costs are deferred and amortized into interest expense using the effective interest method.
Fair value of Debt
The fair value of the 2021 Non-Convertible Senior Notes due 2026 was determined based on the closing trading price of
the Senior Notes as of December 31, 2023 and is categorized accordingly as Level 2 in the fair value hierarchy. The Company
is in compliance with its debt covenants as of December 31, 2023.
Senior Notes
Balance at December 31, 2022
Balance at December 31, 2023
2019 Revolving Credit Facility
Fair Value
Carrying
Amount
(Level 1)
(Level 2)
(Level 3)
Total
$
$
134,584 $
136,215 $
— $
— $
101,293 $
107,557 $
— $
101,293
— $
107,557
On October 4, 2019, the Company entered into a Credit Agreement with Citizens Bank, N.A., for a $10.0 million
Revolving Credit Facility. Borrowings under the Revolving Credit Facility bore interest at a rate equal to, at the Company’s
option, either (1) the arithmetic average of the LIBOR rate determined by reference to the costs of funds for U.S. dollar deposits
for the interest period (one, three or six months (or 12 months if agreed to by all applicable Lenders)) as selected by the
Company relevant to such borrowing plus the applicable margin, or (2) a base rate determined by reference to the greatest of the
federal funds rate plus 0.5%, the prime commercial lending rate as determined by the Agent, and the daily LIBOR rate plus
1.0%, in each case plus an applicable margin and subject to a floor of 0.0%.
On June 30, 2021, the Company paid off the outstanding balance and closed the Revolving Credit Facility.
94
SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except for per share data or unless otherwise noted)
Interest expense
The following table summarizes the Company’s interest expense:
2021 Non-Convertible 8.375% Senior Notes due 2026:
Amortization of debt issuance costs
Interest on borrowings
Amortization of debt discount
2019 Revolving Credit Facility:
Amortization of debt issuance costs
Interest on borrowings
Other1
Total
________________________________
1
Includes interest on uncertain tax provisions.
Year Ended December 31,
2022
2021
2023
$
$
1,534 $
11,816
97
—
—
516
13,963 $
1,391 $
11,815
88
—
—
345
13,639 $
625
5,458
9
84
126
109
6,411
95
SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except for per share data or unless otherwise noted)
Note 14. Accumulated Other Comprehensive (Loss) / Income
The changes in accumulated other comprehensive (loss) income during the years ended December 31, 2023, 2022, and
2021 were as follows:
Balance at
December 31,
2022
Other
comprehensive
income
Tax effect
Balance at
December 31,
2023
$
(40,611) $
18,399 $
— $
(22,212)
(3,520)
(44,131) $
—
18,399 $
$
—
— $
(3,520)
(25,732)
Balance at
December 31,
2021
Other
comprehensive
(loss) income
Tax effect
Balance at
December 31,
2022
$
(29,350) $
(11,261) $
— $
(40,611)
(3,635)
191
(76)
(3,520)
$
(32,985) $
(11,070) $
(76) $
(44,131)
Balance at
December 31,
2020
Other
comprehensive
(loss) income
Tax effect
Balance at
December 31,
2021
$
(26,076) $
(3,274) $
— $
(29,350)
(2,137)
(1,984)
486
(3,635)
$
(28,213) $
(5,258) $
486 $
(32,985)
Foreign currency
Unrealized loss on intercompany foreign currency
transactions
Total
Foreign currency
Unrealized (loss) income on intercompany foreign
currency transactions
Total
Foreign currency
Unrealized (loss) income on intercompany foreign
currency transactions
Total
Note 15. Capital Structure
Reverse Stock Split
On December 4, 2023, the Company’s stockholders approved proposals at a special meeting of stockholders (the “Special
Meeting”) amending the Company’s Restated Certificate of Incorporation (as amended, the “Certificate of Incorporation”), to
effect a reverse stock split of the Company’s common stock, $0.0001 par value (“Common Stock”), at a ratio in the range of 1-
for-5 to 1-to-20, and an associated reduction in the number of shares of Common Stock the Company is authorized to issue. On
December 4, 2023, the Company’s Board of Directors (the “Board”) approved a final split ratio of 1-for-9 (the “Reverse Stock
Split”) where each nine (9) shares of Common Stock issued and outstanding immediately prior to the Effective Time shall,
automatically and without any action on the part of the respective holders thereof, be combined and converted into one (1) share
of Common Stock.
Following such approvals, the Company filed an amendment to the Certificate of Incorporation (the “Certificate of
Amendment”) to effect the Reverse Stock Split with the Secretary of State of the State of Delaware on December 8, 2023 as of
4:01 p.m. Eastern Time. The Certificate of Amendment states that the Company is authorized to issue two classes of stock to be
designated common stock (“Common Stock”) and preferred stock (“Preferred Stock”). The number of shares of Common Stock
authorized to be issued is sixteen million six hundred sixty-six thousand six hundred sixty-seven (16,666,667), par value
$0.0001 per share, and the number of shares of Preferred Stock authorized to be issued is ten million (10,000,000), par value
$0.0001 per share.
As of the opening of trading on December 11, 2023, the Company’s Common Stock began trading on a post-split basis
under CUSIP number 87157B400. The Company’s Common Stock will continue to trade on the Nasdaq Capital Market under
the symbol “SNCR.”
The Reverse Stock Split was effected simultaneously for all shares of Common Stock issued and outstanding, and affected
all holders of the Company’s Common Stock uniformly and does not affect any stockholder’s percentage ownership interests in
the Company, except with respect to the treatment of fractional shares. The Company did not issue fractional shares for post-
Reverse Stock Split shares in connection with the Reverse Stock Split. Stockholders who otherwise were entitled to receive a
96
SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except for per share data or unless otherwise noted)
fractional share of Common Stock had such fractional share rounded up to the nearest whole share. The Company retroactively
displayed the effect of the Reverse Stock Split change in the Consolidated Balance Sheets, and retroactively adjusted the
computations of basic and diluted EPS for all periods presented on the Consolidated Statement of Operations.
As of December 31, 2023, the Company’s authorized capital stock was 26,666,667 shares of stock with a par value of
$0.0001, of which 16,666,667 shares were designated as common stock and 10,000,000 shares were designated as preferred
stock, 150,000 of which were designated Series B Perpetual Non-Convertible Preferred Stock.
Common Stock
Each holder of common stock is entitled to vote on all matters and is entitled to one vote for each share held. Dividends on
common stock will be paid when, and if, declared by the Company’s Board of Directors. No common stock dividends have
ever been declared or paid by the Company.
Common Stock Offering
On June 29, 2021, the Company closed its underwritten public offering of common stock, par value $0.0001 per share. The
offering was conducted pursuant to an underwriting agreement (the “Underwriting Agreement”) dated June 24, 2021, by and
between the Company and B. Riley Securities, Inc., as representative of the several underwriters (the “Underwriters”) for net
proceeds of $102.3 million. At the closing, the Company issued 4,700,855 shares of common stock, inclusive of 427,351 shares
of common stock issued pursuant to the full exercise of the Underwriters’ option to purchase additional shares of common
stock. The Company used the net proceeds for the redemption of the Series A Convertible Preferred Stock.
Treasury Stock
Prior to 2021, the Company held 795,779 shares in Treasury. In the second quarter of 2021, the entire balance of Treasury
Stock was sold in the underwritten public offering. Any related additional paid in capital and par values were removed from the
common stock numbers. Treasury Stock balance is nil as of December 31, 2023.
Preferred Stock
The Board of Directors is authorized to issue preferred shares and has the discretion to determine the rights, preferences,
privileges and restrictions, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation
preferences of preferred stock.
Series B Non-Convertible Preferred Stock
On June 30, 2021, the Company closed a private placement of 75,000 shares of its Series B Perpetual Non-Convertible
Preferred Stock, par value $0.0001 per share, with an initial liquidation preference of $1,000 per share (the “Series B Preferred
Stock”), for net proceeds of $72.8 million (the “Series B Transaction”). The sale of the Series B Preferred Stock was pursuant
to the Series B Preferred Stock Purchase Agreement, dated as of June 24, 2021 (the “Series B Purchase Agreement”), between
the Company and B. Riley Principal Investments, LLC (“BRPI”).
In connection with the closing of the Series B Transaction, the Company (i) filed a Certificate of Designation with the State
of Delaware setting forth the rights, preferences, privileges, qualifications, restrictions and limitations on the Series B Preferred
Stock (the “Series B Certificate”) and (ii) entered into an Investor Rights Agreement with B. Riley Financial, Inc. (“B. Riley
Financial”) and BRPI setting forth certain governance and registration rights of B. Riley Financial with respect to the Company.
Certificate of Designation of the Series B Preferred Stock
The rights, preferences, privileges, qualifications, restrictions and limitations of the shares of Series B Preferred Stock are
set forth in the Series B Certificate. Under the Series B Certificate, the holders of the Series B Preferred Stock are entitled to
receive, on each share of Series B Preferred Stock on a quarterly basis, an amount equal to the dividend rate, as described in the
following sentence, divided by four and multiplied by the then-applicable Liquidation Preference per share of Series B
Preferred Stock (collectively, the “Preferred Dividends”). The dividend rate is (1) 9.5% per annum for the period commencing
on June 30, 2021 and ending on and including December 31, 2021, (2) 13% per annum for the year commencing on January 1,
97
SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except for per share data or unless otherwise noted)
2022 and ending on and including December 31, 2022; and (3) 14% per annum for the year commencing on January 1, 2023
and thereafter. The Preferred Dividends will be due in cash on January 1, April 1, July 1 and October 1 of each year (each, a
“Series B Dividend Payment Date”). The Company may choose to pay the Series B Preferred Dividends in cash or in additional
shares of Series B Preferred Stock. In the event the Company does not declare and pay a dividend in cash on any Series B
Dividend Payment Date, the unpaid amount of the Preferred Dividend will be added to the Liquidation Preference. As of
December 31, 2023, the Liquidation Value and Redemption Value of the Series B Preferred Shares was $63.0 million.
Each share of Series B Preferred Stock is redeemable at the option of the holder upon the occurrence of a “Fundamental
Change” at (i) par in the case of a payment in cash or (ii) 1.5 times par in the case of payment in shares of Common Stock (such
shares being, “Registrable Securities”), subject to certain limitations on the amount of stock that could be issued to the holders
of Series B Stock. In addition, the Company will be permitted to redeem outstanding shares of the Series B Preferred Stock at
any time for the sum of the then-applicable Liquidation Preference and the accrued but unpaid dividends. Pursuant to the Series
B Certificate, the Company will be required to use (i) the first $50.0 million of proceeds from certain transactions (i.e.,
disposition, sale of assets, tax refunds) received by the Company to redeem for cash, shares of the Series B Preferred Stock, on
a pro rata basis among each holder of Series B Preferred Stock and (ii) the next $25.0 million of proceeds from certain
transactions received by the Company may be used by the Company to buy back shares of Common Stock and to the extent, not
used for such purpose by the Company, to redeem, for cash, shares of the Series B Preferred Stock, on a pro rata basis among
each holder of the Series B Preferred Stock.
The Company is required to obtain the prior written consent of the holders holding at least a majority of the outstanding
shares of the Series B Preferred Stock before taking certain actions, including: (i) certain dividends, repayments and
redemptions; (ii) any amendment to the Company’s certificate of incorporation that adversely affects the rights, preferences,
privileges or voting powers of the Series B Preferred Stock; and (iii) issuances of stock ranking senior or equivalent to shares of
the Series B Preferred Stock (including additional shares of the Series B Preferred Stock) in the priority of payment of
dividends or in the distribution of assets upon any liquidation, dissolution or winding up of the Company. Other than with
respect to the foregoing consent rights, the Series B Preferred Stock is non-voting stock.
Investor Rights Agreement
On June 30, 2021, the Company, B. Riley Financial and BRPI entered into an Investor Rights Agreement (the “Investor
Rights Agreement”). Pursuant to the Investor Rights Agreement, for so long as affiliates of B. Riley Financial beneficially own
at least 10% of the outstanding shares of common stock (unless such equity threshold percentage is not met due to dilution from
equity issuances), B. Riley Financial is entitled to nominate one Class II director (the “B. Riley Nominee”) to the Company’s
board of directors (the “Board”), who shall be an employee of B. Riley Financial or its affiliates and is approved by the Board,
such approval not to be unreasonably withheld. For so long as affiliates of B. Riley Financial beneficially own 5% or more but
less than 10% of the outstanding shares of common stock (unless such equity threshold percentage is not met due to dilution
from equity issuances), B. Riley Financial is entitled to certain board observer rights.
A summary of the Company’s Series B Preferred Stock balance at December 31, 2023 and changes during the year ended
December 31, 2023 and 2022, are presented below:
Balance at December 31, 2021
Amortization of preferred stock issuance costs
Issuance of preferred PIK dividend
Redemption of Series B preferred shares
Balance at December 31, 2022
Amortization of preferred stock issuance costs
Redemption of Series B preferred shares
Balance at December 31, 20231
________________________________
1
Series B Preferred Stock
Amount
Shares
P
Y$
75
—
3
(7)
71 $
—
(10)
61 $
72,505
143
2,438
(6,738)
68,348
328
(9,874)
58,802
Series B preferred stock net principal balance of $58.8 million is presented as gross principal balance of $60.8 million net of $2.0
million unamortized issuance costs.
98
SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except for per share data or unless otherwise noted)
The Company paid Series B Perpetual Non-Convertible Preferred Stock dividend of $9.8 million in cash for the year ended
December 31, 2023. On January 2, 2024 the Company paid the accrued Series B Perpetual Non-Convertible Preferred Stock
dividend of $2.1 million in cash.
Series A Convertible Preferred Stock
In accordance with the terms of the Share Purchase Agreement dated as of October 17, 2017 (the “PIPE Purchase
Agreement”), with Silver Private Holdings I, LLC, an affiliate of Siris (“Silver”), on February 15, 2018, the Company issued to
Silver 185,000 shares of its newly issued Series A Convertible Participating Perpetual Preferred Stock (the “Series A Preferred
Stock”), par value $0.0001 per share, with an initial liquidation preference of $1,000 per share, in exchange for $97.7 million in
cash and the transfer from Silver to the Company of the 666,075 shares of the Company’s common stock held by Silver (the
“Preferred Transaction”).
Redemption of Series A Preferred Stock
The net proceeds from the common stock public offering, Senior Note offering and the Series B Transaction was used in
part to fully redeem all outstanding shares of the Company’s Series A Preferred Stock on June 30, 2021 (the “Redemption”).
The Company redeemed in full all of the 268,917 outstanding shares of the Series A Preferred Stock for an aggregate
Redemption Price of $278.7 million and all rights under the Investor Rights Agreement relating to the Series A Preferred Stock
were terminated effective with the Redemption. No Series A Preferred Stock remains outstanding or authorized as of December
31, 2023. In addition, on June 30, 2021, in connection with the redemption of the Series A Preferred Stock, the Investor Rights
Agreement between the Company and Silver terminated.
Note 16. Stock Plans
In March 2015, the Company adopted the 2015 Equity Incentive Plan (the “2015 Plan”). The 2015 Plan replaces the
Company’s prior 2000 Equity Incentive Plan and the 2006 Equity Incentive Plan. Beginning March 2015, all awards were
granted under the 2015 Plan. In addition, any awards that were previously granted under any prior Plans that terminate without
issuance of shares, shall be eligible for issuance under the 2015 Plan.
Under the 2015 Plan, the Company may grant to its employees, outside directors and consultants awards in the form of
non-qualified stock options, shares of restricted stock, stock units, or stock appreciation rights and performance shares. The
Company’s Board of Directors administers the Plan and is responsible for determining the individuals to be granted options or
shares, the number of options or shares each individual will receive, the price per share and the exercise period of each option.
The maximum number of shares of common stock authorized for issuance under the 2015 Plan is 4,688,576 shares as of
December 31, 2023.
On December 15, 2017, the Compensation Committee adopted the 2017 New Hire Equity Incentive Plan (“2017 Plan”),
which is intended to be exempt from the stockholder approval requirements under the “inducement grant exception” provided
by the Inducement Rule. The Committee authorized the issuance of stock grants to new hires, with the purpose of promoting the
long-term success of the Company and the creation of stockholder value by (a) providing for the attraction and retention of new
employees with exceptional qualifications, (b) encouraging new employees to focus on critical long-range objectives, and
(c) linking new employees directly to stockholder interests through increased stock ownership. As required by the Inducement
Rule, the Company issues a press release promptly upon issuing shares to new employees pursuant to the 2017 Plan. The
maximum number of shares of common stock authorized for issuance under the 2017 Plan is 229,635 shares as of December
31, 2023.
As of December 31, 2023, there were 0.7 million shares available for the grant or award under the Company’s 2015 Plan
and 0.1 million shares available for the grant or award under the Company’s 2017 Plan.
The Company’s performance based cash units granted to employees under the Long Term Incentive (“LTI”) Plans have
been accounted for as liability awards, due to the Company’s intent and the ability to settle such awards in cash upon vesting
and has reflected such awards in accrued expenses on the Condensed Consolidated Balance Sheet. As of December 31, 2023,
the liability for such awards is approximately $0.4 million.
99
SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except for per share data or unless otherwise noted)
Stock-Based Compensation
The following table summarizes stock-based compensation expense related to all of the Company’s stock awards included
by operating expense categories, as follows:
Cost of revenues
Research and development
Selling, general and administrative
Total stock-based compensation expense
Year Ended December 31,
2023
2022
2021
$
$
109 $
249 $
1,291
2,990
1,472
2,743
4,390 $
4,464 $
719
2,313
4,529
7,561
The following table summarizes stock-based compensation expense related to all of the Company’s stock awards included
by award types, as follows:
Stock options
Restricted stock awards
Performance based cash units
Total stock-based compensation before taxes
Tax benefit
Year Ended December 31,
2022
2021
2023
$
$
$
1,334 $
2,930
126
4,390 $
958 $
1,981 $
2,500
(17)
4,464 $
938 $
3,061
4,356
144
7,561
1,541
The total stock-based compensation cost related to unvested equity awards as of December 31, 2023 was approximately
$4.0 million. The expense is expected to be recognized over a weighted-average period of approximately 0.7 years.
The total stock-based compensation cost related to unvested performance-based cash units as of December 31, 2023 was
approximately $0.2 million. The expense is expected to be recognized over a weighted-average period of approximately 1.2
years.
Stock Options
Stock options that were granted under the Company’s Plans generally vest one-third of the shares on the first, second and
third anniversary of the grant date subject to optionee’s continuous service.
Other than as set forth in Note 15. Capital Structure, there were no significant changes to the Company’s Stock Option
Plans during the year ended December 31, 2023.
The Company uses the Black-Scholes option pricing model for determining the estimated fair value for stock options. The
weighted-average assumptions used in the Black-Scholes option pricing model are as follows:
Expected stock price volatility
Risk-free interest rate
Expected life of options (in years)
Expected dividend yield
Weighted-average fair value of the options
Year Ended December 31,
2022
2021
2023
74.5 %
4.3 %
4.30
74.1 %
3.1 %
4.15
0.0 %
3.95 $
0.0 %
6.39 $
$
82.3 %
0.7 %
4.23
0.0 %
16.49
100
SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except for per share data or unless otherwise noted)
The following table summarizes information about stock options outstanding as of December 31, 2023:
Options
Outstanding at December 31, 2022
Options Granted
Options Exercised
Options Cancelled
Outstanding at December 31, 2023
Vested and exercisable at December 31, 2023
Number of
Options
Weighted-
Average
Exercise Price
Weighted-
Average
Remaining
Contractual
Term (Years)
Aggregate
Intrinsic
Value
739 $
6
—
(96)
649 $
434 $
34.23
6.63
—
58.23
30.44
38.42
3.71 $
2.96 $
5
—
The total intrinsic value of stock options exercised during the year ended December 31, 2023 and 2022 was nil and nil,
respectively. The total intrinsic value of stock options exercisable as of December 31, 2023 and 2022 was nil and nil,
respectively.
Awards of Restricted Stock and Performance Stock
Restricted stock awards (“Restricted Stock”) granted under the Company’s Plans generally vest one-third of the applicable
shares on the first, second, and third anniversary of the date of grant, subject to continuous service provided.
Generally, performance stock awards granted under the Company’s 2015 Plan vest at the end of a three-year period based
on service and achievement of certain performance objectives determined by the Company’s Board of Directors.
Other than as set forth in Note 15. Capital Structure, there were no significant changes to the Company’s restricted stock
award (“Restricted Stock”) and performance stock plan during the year ended December 31, 2023.
A summary of the Company’s unvested restricted stock at December 31, 2023, and changes during the year ended
December 31, 2023, is presented below:
Unvested Restricted Stock
Unvested at December 31, 2022
Granted
Granted adjustment1
Vested
Forfeited
Unvested at December 31, 2023
_____________________________
Number of
Awards
Weighted-
Average
Grant Date
Fair Value
487 $
366
(44)
(204)
(114)
491 $
16.37
8.54
17.17
15.36
11.61
10.88
1
Represents shares adjusted due to rounding up to the whole shares due to Reverse Stock Split during the fourth quarter of 2023.
Restricted stock awards are granted subject to other service conditions or service and performance conditions
(“Performance-Based Awards”). Restricted stock and Performance-Based Awards are measured at the closing stock price at the
date of grant and are recognized straight line over the requisite service period.
101
SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except for per share data or unless otherwise noted)
Performance Based Cash Units
Performance based cash units (“PBCU”) generally vest at the end of a three-year period based on service and achievement
of certain performance objectives determined by the Company’s Board of Directors. The PBCU can be settled in cash or in
equity as determined by the Compensation Committee.
A summary of the Company’s unvested performance-based cash units at December 31, 2023 and changes during
the year ended December 31, 2023, is presented below:
Performance based cash units
Outstanding at December 31, 2022
Granted
Granted adjustment 1
Vested and distributed 2
Forfeited
Number of
Awards
Period end
Fair Value
653 $
5.58
134
(143)
(14)
(123)
Outstanding at December 31, 2023
507 $
6.21
_____________________________
1
2
Includes changes in the unvested units due to performance adjustments.
Includes earned PBCU that vested and were distributed to participants during the period.
Performance based cash units are measured at the closing stock price at the reporting period end date and are recognized
straight line over the requisite service period. The expense for the period will increase or decrease based on updated fair values
of these awards as well as the percentage achievement of the performance metrics at each reporting date.
Note 17. 401(k) Plan
The Company has a 401(k) plan (the “401(k) Plan”) covering all eligible employees. The 401(k) Plan allows for a
discretionary employer match. The Company incurred and expensed $1.6 million, $1.5 million, and $2.2 million for the years
ended December 31, 2023, 2022 and 2021, respectively, in 401(k) Plan match contributions.
Note 18. Restructuring
The Company continues to identify workforce optimization opportunities to better align the Company’s resources with its
key strategic priorities.
A summary of the Company’s restructuring accrual at December 31, 2023 and changes during the year ended December
31, 2023, are presented below:
Employment termination costs
$
808 $
4,013 $
(2,419) $
(14) $
2,388
Balance at
December 31,
2022
Charges
Payments
Other
Adjustments
Balance at
December 31,
2023
Employee termination costs are reported in Restructuring charges on the Consolidated Statements of Operations. Short
term liabilities related to employee termination costs of $2.1 million are included in Accrued expenses under Current liabilities,
and long term portion of $0.3 million included in Other liabilities, non-current on the Consolidated Balance Sheets.
102
SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except for per share data or unless otherwise noted)
Note 19. Income Taxes
The components of (loss) income from continuing operations before income taxes are as follows:
Domestic
Foreign
Total
Year Ended December 31,
2023
2022
2021
$
$
(48,967) $
(34,752) $
(53,746)
19,656
27,974
16,694
(29,311) $
(6,778) $
(37,052)
The components of income tax (expense) benefit from continuing operations are as follows:
Current:
Federal
State
Foreign
Deferred:
Federal
State
Foreign
Year Ended December 31,
2023
2022
2021
$
(1,114) $
(1,159) $
6,443
(67)
(821)
(62)
1,139
(2,747)
3
3
(26)
157
10
(65)
635
(26)
(21)
1,821
8,787
Income tax (provision) benefit
$
(4,743) $
59 $
The Company recognized approximately $4.7 million in related income tax expense and $0.1 million in related income tax
benefit during the years ended December 31, 2023 and 2022, respectively. The effective tax rate was approximately (16.2)% for
the year ended December 31, 2023, which was lower than the U.S. federal statutory rate primarily due to the impact of Global
Intangible Low-Taxed Income, attributable to income in foreign jurisdictions and the impact of the U.S. capitalization of
research expenses, and the impact of recognizing a deferred tax liability associated with changes in management’s indefinite
reinvestment assertion under APB 23 for one foreign jurisdiction. This decrease was partially offset by loss jurisdictions where
full valuation allowances have been recorded, foreign rate differential and GAAP to statutory adjustments. The Company’s
effective tax rate was approximately 0.9% for the year ended December 31, 2022, which was lower than the U.S. federal
statutory rate primarily due to the impact of Global Intangible Low-Taxed Income, attributable to income in foreign
jurisdictions and the impact of the U.S. capitalization of research expenses, and the divestiture of the DXP and Activation
assets. This decrease was partially offset by loss jurisdictions where full valuation allowances have been recorded and foreign
income tax credits generated in the period.
103
SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except for per share data or unless otherwise noted)
Reconciliations of the statutory tax rates and the effective tax rates from continuing operations for the years ended
December 31, 2023, 2022 and 2021 are as follows:
Statutory rate
State taxes, net of federal benefit
Effect of rates different than statutory
Minority interest
Stock based compensation
Foreign basis differences
Regulatory matters
Other permanent adjustments
Withholding tax
Federal and foreign tax credits
Change in valuation allowance
Uncertain tax positions
Other
Divestiture of assets
Global intangible low-taxed income
NOL carryback and other refund claims
Deferred tax adjustments
Return to provision
ABP 23 liability
Effective tax rate
Year Ended December 31,
2023
2022
2021
21.0 %
(0.2) %
4.2 %
— %
(1.9) %
5.0 %
— %
(3.3) %
(2.8) %
0.6 %
4.8 %
0.1 %
— %
— %
(20.5) %
— %
(1.1) %
(1.2) %
(20.9) %
(16.2) %
21.0 %
0.8 %
30.2 %
0.6 %
(14.5) %
16.1 %
— %
(3.3) %
— %
1.6 %
89.2 %
(2.3) %
(0.1) %
(17.6) %
(131.3) %
— %
2.2 %
8.3 %
— %
0.9 %
21.0 %
(0.3) %
3.9 %
(0.1) %
(4.1) %
5.4 %
(7.1) %
(2.2) %
— %
0.3 %
9.0 %
(3.5) %
(0.4) %
— %
(9.8) %
11.6 %
— %
— %
— %
23.7 %
104
SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except for per share data or unless otherwise noted)
Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s
deferred tax assets and liabilities are as follows:
Deferred tax assets:
Accrued liabilities
Deferred revenue
Bad debts reserve
Deferred compensation
Federal net operating loss carry forwards
State net operating loss carry forwards
Foreign net operating loss carry forwards
Lease obligations
Capital loss carry forwards
Intangible assets
Basis difference
Credits
Fixed assets
Interest limitation
Capitalization of research expenses
Other
Total deferred tax assets
Deferred tax liabilities:
Unrepatriated Earnings
Basis difference
Depreciation and amortization
Prepaids
Lease assets
Other
Total deferred tax liabilities
Less: valuation allowance
Net deferred income tax (liabilities) assets
As of December 31,
2023
2022
$
$
$
$
486 $
—
3,163
4,150
4,271
8,641
4,999
5,706
7,633
1,470
6,372
3,331
639
1,088
21,805
33
73,787 $
(6,604) $
(2,078)
(666)
(323)
(2,524)
(734)
(12,929)
(64,065)
(3,207) $
935
824
2,219
4,164
4,871
8,771
7,030
6,509
5,449
2,392
6,454
7,815
732
32
12,155
233
70,585
—
(2,880)
(709)
(466)
(3,470)
(497)
(8,022)
(63,029)
(466)
As of December 31, 2023, the Company has federal and state income tax net operating loss (“NOL”) carryforwards of
$20.3 million and $148.9 million, respectively, including NOL carryforwards which will expire at various dates from 2025
through 2041, and NOL carryforwards which do not expire. The Company also has foreign NOL carryforwards in various
jurisdictions of $36.5 million that have various carryforward periods. Such NOL carryforwards expire as follows:
Year
2024
2025
2026-2041
Indefinite
Total
105
NOL
carryforward
$
$
—
445
169,612
35,683
205,740
SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except for per share data or unless otherwise noted)
As of December 31, 2022, the Company has federal and state income tax credit carryforwards of $2.2 million and $1.5
million, respectively, including state credits of approximately $0.4 million which will expire in 2024, other credits which will
expire at various dates from 2025 through 2039 and credits which do not expire.
In evaluating the Company’s ability to recover its deferred tax assets within the jurisdiction from which they arise, the
Company considers all available positive and negative evidence, including scheduled reversals of deferred tax liabilities,
projected future taxable income, tax-planning strategies, and results of recent operations. In projecting future taxable income,
the Company begins with historical results and incorporates assumptions including the amount of future state, federal and
foreign pretax operating income, the reversal of temporary differences, and the implementation of feasible and prudent tax-
planning strategies. These assumptions require significant judgment about the forecasts of future taxable income and are
consistent with the plans and estimates the Company is using to manage the underlying businesses.
The foreign NOL carryforwards in the income tax returns filed included unrecognized tax benefits taken in prior years. The
NOLs for which a deferred tax asset is recognized for financial statement purposes in accordance with ASC 740 are presented
net of these unrecognized tax benefits.
The Company continues to evaluate the ability to realize all of its net deferred tax assets at each reporting date and records
a benefit for deferred tax assets to the extent it has deferred tax liabilities that provide a source of income to benefit the deferred
tax asset. As a result of this analysis, the Company recorded a valuation allowance against the net deferred tax assets of certain
foreign jurisdictions as the realization of these assets is not more likely than not, given uncertainty of future earnings in these
jurisdictions. The valuation allowance increased by $1.0 million during the year ended December 31, 2023 and decreased by
$5.9 million during the year ended December 31, 2022, respectively. The increase in tax year ended December 31, 2023 is
primarily related to an increase in deferred tax assets including capital loss carryforward, interest expense limitation and
capitalization of research expenditures, net of utilization of tax credit and net operating loss carryforwards. This increase was
partially offset by an increase in deferred tax liabilities primarily associated with changes in management’s indefinite
reinvestment assertion under APB 23 for one foreign jurisdiction. The decrease in tax year ended December 31, 2022 is
primarily related to a decrease in deferred tax assets including deferred revenue, intangibles and net operating loss, interest
expense and tax credit carryforwards, net of capitalization of research expenditures. This decrease was partially offset by a
decrease in deferred tax liabilities primarily associated with intangible assets during the period.
The Company's accounting policy is to record the tax impacts of Global Intangible Low-Taxed Income as a period cost.
The Company’s current accounting policy related to stranded tax effects in accumulated other comprehensive income is to
review and reclassify on an item-by-item basis.
The Company is subject to taxation in the United States and various states and foreign jurisdictions. As of December 31,
2023, the Company’s tax years for 2020 through 2023 are subject to examination by the tax authorities. With few exceptions, as
of December 31, 2023, the Company is no longer subject to U.S. federal, state, local, or foreign examinations by tax authorities
for years before 2020. Additionally, to the extent we utilize our NOL carryforwards in the future, the tax years in which the
attribute was generated may still be adjusted upon examination by the tax authorities in the future period when the attribute is
utilized.
During 2021 the Internal Revenue Service commenced an audit of certain of the Company’s prior year U.S. federal income
tax filings, including the 2013 through 2020 tax years. The audit is currently ongoing and while receipt of the associated
refunds would materially improve its financial position, the Company does not believe that the results of this audit will have a
material effect on its financial position or results of operations. Due to the ongoing audit, U.S. federal tax returns for years 2013
– 2020 remain subject to future examination by the tax authorities.
The Company received $4.3 million in federal tax refunds in the second quarter of 2022. There is no change to the
Company’s position on the remaining tax refunds.
Our policy has been to leave our cumulative unremitted foreign earnings invested indefinitely outside the United States,
and we intend to continue this policy for most of our foreign subsidiaries. During 2023, we changed our indefinite reinvestment
assertion for our Indian subsidiary and recorded a deferred tax liability associated with the outside basis difference. The
Company continues to assert permanent reinvestment of foreign earnings in all other foreign jurisdictions. Due to the timing
and circumstances of repatriation of such earnings, if any, it is not practicable to determine the unrecognized deferred tax
liability relating to such amounts.
106
SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except for per share data or unless otherwise noted)
In March 2020, in response to the COVID-19 pandemic, the Coronavirus Aid, Relief and Economic Security Act (“CARES
Act”) was signed into law. The CARES Act provides numerous tax provisions and other stimulus measures, including
temporary changes regarding the prior and future utilization of net operating losses. The CARES Act amends the Net Operating
Loss provisions of the Tax Cuts and Jobs Act, allowing for the carryback of losses arising in tax years 2018, 2019 and 2020, to
each of the five taxable years preceding the taxable year of loss.
On October 8, 2021, the Organization for Economic Co-operation and Development (“OECD”) released a statement on the
OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting, which agreed to a two-pillar solution to address tax
challenges of the digital economy. On December 20, 2021, the OECD released Pillar Two model rules defining a 15% global
minimum tax rate for large multinational corporations (the “Pillar Two Framework”). The OECD continues to release
additional guidance and countries are implementing legislation with widespread adoption of the Pillar Two Framework
expected by 2024. The Company is not currently subject to these rules but is continuing to evaluate the Pillar Two Framework
and its potential impact on future periods.
On March 11, 2021 the American Rescue Plan Act ("ARPA") was signed into law. The legislation was aimed at addressing
the continuing economic and health impacts of the COVID-19 pandemic. This legislative relief, along with the previous
governmental relief packages provide for numerous changes to current tax law. ARPA does not materially impact the
Company’s financial statements.
On August 16, 2022, the Inflation Reduction Act of 2022 ("IRA") was signed into law. This legislation includes significant
changes relating to tax, climate change, energy and health care. Among other provisions, the IRA introduces a book minimum
tax assessed on financial statement income of certain large corporations and an excise tax on share repurchases. The Company
does not anticipate these provisions will have a material impact on our results of operations or financial position, when
effective.
On January 31, 2024, the House of Representatives passed a proposed tax bill which, among other provisions, aims to
reinstate 100% bonus depreciation for property placed in service in 2023 and through 2025 and to allow taxpayers to expense
domestic research costs retroactively back to 2022 and prospectively through tax years beginning before 2026. Enactment
remains uncertain and the Company continues to monitor the ongoing developments in the proposed legislation.
A reconciliation of the amounts of unrecognized tax benefits excluding interest, are as follows:
Balance at December 31, 2020
Decrease related to lapse of Statute of Limitations
Increase for tax positions of current period
Balance at December 31, 2021
Decrease related to lapse of Statute of Limitations
Increase for tax positions of current period
Balance at December 31, 2022
Decrease related to lapse of Statute of Limitations
Balance at December 31, 2023
Unrecognized
tax benefits
$
$
3,283
(827)
2,058
4,514
(1,043)
966
4,437
(64)
4,373
Included in the balance of unrecognized tax benefits associated with uncertain tax positions as of the years ended
December 31, 2023 and 2022, are $3.8 million and $3.9 million, respectively, of tax benefits that, if recognized, would affect
the effective tax rate.
The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in interest expense. The
liability for unrecognized tax benefits excludes accrued interest of $0.7 million, $0.4 million and $0.4 million, for the years
ended December 31, 2023, 2022 and 2021, respectively. The Company does not believe that it is reasonably possible that any of
its currently unrecognized tax benefits primarily related to research and development credits and other U.S. tax positions, may
be recognized by the end of 2024 as a result of a lapse of the statute of limitations.
107
SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except for per share data or unless otherwise noted)
Note 20. Earnings per Common Share (“EPS”)
Basic EPS is computed based upon the weighted average number of common shares outstanding for the year. Diluted EPS
is computed based upon the weighted average number of common shares outstanding for the year plus the dilutive effect of
common stock equivalents using the treasury stock method and the average market price of the Company’s common stock for
the year. The Company includes participating securities (Redeemable Convertible Preferred Stock - Participation with
Dividends on Common Stock that contain preferred dividend) in the computation of EPS pursuant to the two-class method. The
two-class method of computing earnings per share is an allocation method that calculates earnings per share for common stock
and participating securities. During periods of net loss, no effect is given to the participating securities because they do not
share in the losses of the Company.
The following table provides a reconciliation of the numerator and denominator used in computing basic and diluted net
income attributable to common stockholders per common share from operations.
Year Ended December 31,
2022
2021
2023
Numerator - Basic:
Net loss from continuing operations
$
(34,054) $
(6,719) $
(28,265)
Net income (loss) attributable to redeemable noncontrolling interests
Preferred stock dividend
Net loss attributable to Synchronoss from continuing operations
36
(10,007)
(44,025)
(200)
(9,552)
(16,471)
156
(35,509)
(63,618)
Net (loss) income from discontinued operations, net of taxes
(20,517)
(997)
5,167
Net loss attributable to Synchronoss
$
(64,542) $
(17,468) $
(58,451)
Numerator - Diluted:
Net loss attributable to Synchronoss from continuing operations
Net (loss) income from discontinued operations, net of taxes
Net loss attributable to Synchronoss
Denominator:
Weighted average common shares outstanding — basic
Weighted average common shares outstanding — diluted
Earnings (loss) per share:
Basic EPS:
Net loss from continuing operations
Net (loss) income from discontinued operations
Basic EPS
Diluted EPS:
Net loss from continuing operations
Net (loss) income from discontinued operations
Diluted EPS
$
$
$
$
$
$
$
$
(44,025) $
(16,471) $
(63,618)
(20,517)
(997)
5,167
(64,542) $
(17,468) $
(58,451)
9,745
9,745
9,626
9,626
7,235
7,235
(4.52) $
(2.10) $
(6.62) $
(4.52) $
(2.10) $
(6.62) $
(1.71) $
(0.10) $
(1.81) $
(1.71) $
(0.10) $
(1.81) $
(8.79)
0.71
(8.08)
(8.79)
0.71
(8.08)
108
SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except for per share data or unless otherwise noted)
Note 21. Commitments
Non-cancelable agreements
The Company has various non-cancelable arrangements such as services for hosting, support, and software that expire at
various dates, with the latest expiration in 2026.
Aggregate annual future minimum payments under non-cancelable agreements as of December 31, 2023 are as follows:
Year
2024
2025
2026
Total
Note 22. Legal Matters
Non-cancelable
agreements
$
17,729
12,559
797
$
31,085
In the ordinary course of business, the Company is regularly subject to various claims, suits, regulatory inquiries and
investigations. The Company records a liability for specific legal matters when it determines that the likelihood of an
unfavorable outcome is probable, and the loss can be reasonably estimated. Management has also identified certain other legal
matters where they believe an unfavorable outcome is not probable and, therefore, no reserve is established. Although
management currently believes that resolving claims against the Company, including claims where an unfavorable outcome is
reasonably possible, will not have a material impact on the Company’s business, financial position, results of operations, or
cash flows, these matters are subject to inherent uncertainties and management’s view of these matters may change in the
future. The Company also evaluates other contingent matters, including income and non-income tax contingencies, to assess the
likelihood of an unfavorable outcome and estimated extent of potential loss. It is possible that an unfavorable outcome of one or
more of these lawsuits or other contingencies could have a material impact on the liquidity, results of operations, or financial
condition of the Company.
In the third quarter of 2017, the SEC and Department of Justice (the “DoJ”) initiated investigations in connection with
certain financial transactions that the Company effected in 2015 and 2016 and its disclosure of and accounting for such
transactions, which the Company restated in the third quarter of 2018 in its restated annual and quarterly financial statements
for 2015 and 2016. On June 7, 2022 the SEC approved the Offer of Settlement and filed an Order Instituting Cease-And-Desist
Proceedings pursuant to Section 21C of the Securities Exchange Act of 1934, Making Findings, and Imposing a Cease-And-
Desist Order (the “SEC Order”). Pursuant to the terms of the SEC Order, the Company consented to pay a civil penalty in the
amount of $12.5 million in equal quarterly installments over two years and to cease and desist from committing or causing any
violations of Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and the associated rules thereunder. In
addition, failure to comply with the provisions of the SEC Order could result in further actions by one or both governmental
agencies which could have a material adverse effect on the Company’s results of operations. The expense associated with this
settlement of the SEC Order has previously been accrued in the Company’s financial statements. Also on June 7, 2022, the
SEC filed a civil action against two former members of the Company’s management team, alleging misconduct arising out of
the restated transactions that took place in 2015 and 2016 investigated by the SEC as set forth above. The Company may be
required to indemnify the former members of management in that action for certain costs and expenses, including reasonable
attorney’s fees. At this time it is not possible for us to estimate the amount, if any, of such indemnification obligations.
On or about July 12, 2023, the Company filed a complaint in the Superior Court of the State of Delaware against iQmetrix
Global Ltd. (“iQmetrix") for breach of the asset purchase and transition services agreements by and between the Company and
iQmetrix as a result of iQmetrix’s failure to pay amounts due under those agreements in excess of $1,200,000. On September
11, 2023, iQmetrix filed its “Answer Defenses and Counterclaims” against the Company, claiming the Company breached the
asset purchase, transition services and software license agreements, committed fraud and breached the implied covenant of
good faith and fair dealing entitling iQmetrix to an amount to be determined at trial. On October 10, 2023, the Company filed
its “Answer to Defendant’s Counterclaims” denying all counts asserted by iQmetrix and asserting certain affirmative defenses
thereto. The Company believes that the counterclaims are without merit, and the Company intends to defend all such
counterclaims.
109
SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except for per share data or unless otherwise noted)
Due to the inherent uncertainty of litigation, the Company cannot predict the outcome of the litigation and can give no
assurance that the asserted claims will not have a material adverse effect on its financial position, prospects, or results of
operations.
Except as set forth above, the Company is not currently subject to any other legal proceedings that could have a material
adverse effect on its operations; however, the Company may from time to time become a party to various legal proceedings
arising in the ordinary course of our business.
Note 23. Additional Financial Information
Other (expense) income, net
The following table sets forth the components of Other (expense) income, net included in the Consolidated Statements of
Operations:
Foreign exchange gains (losses)1
Government refunds2
Income from sale of intangible assets3
Other4
Total
_____________________________
1
2
3
4
Represents fair value of foreign exchange gains and losses.
Represents government and tax refunds.
Represents gain on sale on the Company’s IP addresses and patents.
Represents an aggregate of individually immaterial transactions.
Year Ended December 31,
2023
2022
2021
$
(5,131) $
2,835 $
(5,839)
—
—
3
828
—
(110)
450
550
(77)
$
(5,128) $
3,553 $
(4,916)
110
SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except for per share data or unless otherwise noted)
Note 24. Summary of Quarterly Results of Operations (Unaudited)
Quarterly results of operations for 2023 and 2022 are as follows:
2023
March 31,
June 30,
September 30,
December 31,
Quarter Ended
Net revenues
Net loss from continuing operations
Net (loss) income from discontinued operations,
net of taxes
Net loss
Net loss attributable to Synchronoss
Earnings (loss) per share1:
Basic:
Net loss from continuing operations
Net loss from discontinued operations
Basic
Diluted:
Net loss from continuing operations
Net loss from discontinued operations
Diluted
Weighted-average common shares outstanding:
$
$
$
$
$
Basic
Diluted
________________________________
41,985 $
(9,338)
41,019 $
(8,469)
39,790 $
(4,442)
(1,593)
(10,931)
(13,391)
(49)
(8,518)
(10,979)
1,763
(2,679)
(5,171)
(1.22) $
(0.17)
(1.39) $
(1.22) $
(0.17)
(1.39) $
(1.13) $
—
(1.13) $
(1.13) $
—
(1.13) $
(0.71) $
0.18
(0.53) $
(0.71) $
0.18
(0.53) $
9,653
9,653
9,685
9,685
9,809
9,809
41,402
(11,805)
(20,638)
(32,443)
(35,001)
(1.46)
(2.10)
(3.56)
(1.46)
(2.10)
(3.56)
9,822
9,822
1
Per common share amounts for the quarters and full year have been calculated separately. Accordingly, quarterly amounts do not add to
the annual amount because of differences in the number of weighted-average common shares outstanding during each period which
results principally from the effect of issuing shares of the Company’s common stock and options exercised throughout the year.
111
SYNCHRONOSS TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in tables in thousands, except for per share data or unless otherwise noted)
2022
March 31,
June 30,
September 30,
December 31,
Quarter Ended
Net revenues
Net loss from continuing operations
Net (loss) income from discontinued operations,
net of taxes
Net loss
Net loss attributable to Synchronoss
Earnings (loss) per share1:
Basic:
Net loss from continuing operations
Net loss from discontinued operations
Basic
Diluted:
Net loss from continuing operations
Net loss from discontinued operations
Diluted
Weighted-average common shares outstanding:
$
$
$
$
$
Basic
Diluted
________________________________
46,879 $
(619)
46,055 $
8,874
39,570 $
1,210
(2,418)
(3,037)
(5,590)
(953)
7,921
5,327
(124)
1,086
(1,278)
(0.33) $
(0.26)
(0.59) $
(0.33) $
(0.26)
(0.59) $
0.65 $
(0.10)
0.55 $
0.63 $
(0.09)
0.54 $
(0.12) $
(0.01)
(0.13) $
(0.12) $
(0.01)
(0.13) $
9,541
9,541
9,680
9,917
9,600
9,600
41,252
(16,184)
2,498
(13,686)
(15,927)
(1.92)
0.26
(1.66)
(1.92)
0.26
(1.66)
9,606
9,606
1
Per common share amounts for the quarters and full year have been calculated separately. Accordingly, quarterly amounts do not add to
the annual amount because of differences in the number of weighted-average common shares outstanding during each period which
results principally from the effect of issuing shares of the Company’s common stock and options exercised throughout the year.
112
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
Not applicable.
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Exchange Act)
that are designed to ensure that information required to be disclosed by us in reports that we file under the Exchange Act is
recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and that such
information required to be disclosed by us in reports that we file under the Exchange Act is accumulated and communicated to
our management, including our Chief Executive Officer, or CEO, and our Chief Financial Officer, or CFO, to allow timely
decisions regarding required disclosure. Management, with the participation of our CEO and CFO, performed an evaluation of
the effectiveness of our disclosure controls and procedures as of December 31, 2023. Based on that evaluation, our CEO and
CFO concluded that our disclosure controls and procedures were effective as of December 31, 2023.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as
defined in Rule 13a-15(f) or Rule 15d-15(f) under the Exchange Act). Under the supervision and with the participation of our
management, including our CEO and CFO, we conducted an evaluation of the effectiveness of our internal control over
financial reporting based on the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (2013 Framework). Based on that evaluation, our management concluded that our
internal control over financial reporting was effective as of December 31, 2023 to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of consolidated financial statements for external reporting purposes in
accordance with GAAP.
Ernst & Young LLP, the independent registered public accounting firm that audited our consolidated financial statements
included in this Annual Report on Form 10-K, audited the effectiveness of our internal control over financial reporting as of
December 31, 2023. Ernst & Young LLP has issued their report which is included elsewhere herein.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) and Rule 15d-15(f)
under the Exchange Act) identified in connection with the evaluation of our controls performed during the year ended
December 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial
reporting.
Limitations on Controls
Our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable
assurance of achieving their objectives as specified above. Management does not expect, however, that our disclosure controls
and procedures or our internal control over financial reporting will prevent or detect all error and fraud. Any control system, no
matter how well designed and operated, is based upon certain assumptions and can provide only reasonable, not absolute,
assurance that its objectives will be met. Further, no evaluation of controls can provide absolute assurance that misstatements
due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been
detected.
113
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Synchronoss Technologies, Inc.:
Opinion on Internal Control Over Financial Reporting
We have audited Synchronoss Technologies, Inc.’s internal control over financial reporting as of December 31, 2023, based on
criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Synchronoss Technologies, Inc. (the Company)
maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on the
COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated balance sheets of the Company as of December 31, 2023 and 2022, the related consolidated
statements of operations, comprehensive (loss) income, stockholders’ equity and cash flows for each of the three years in the
period ended December 31, 2023, and the related notes and financial statement schedule listed in the Index at Item 15(a)(2) and
our report dated March 25, 2024 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report
on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control
over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Iselin, New Jersey
March 25, 2024
114
ITEM 9B. OTHER INFORMATION
Rule 10b5-1 Trading Plans
On November 10, 2023, Laurie Harris, director and chairperson of the audit committee of the Company’s Board of
Directors, adopted a trading arrangement for the sale of shares of our common stock (a "Rule 10b5-1 Trading Plan") that is
intended to satisfy the affirmative defense conditions of Securities Exchange Act Rule 10b5-1(c). Ms. Harris’ Rule 10b5-1
Trading Plan provides for the sale of up to 4,810 shares of common stock pursuant to the terms of the plan. The plan is effective
through November 11, 2024 unless earlier terminated in accordance with the terms of the plan.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
PART III
a.
Identification of Directors. Information concerning the directors of Synchronoss is set forth under the heading
“Election of Directors” in the Synchronoss Proxy Statement for the 2024 Annual Meeting of Stockholders to be filed
with the SEC within 120 days of the fiscal year ended December 31, 2023 and is incorporated herein by reference.
b. Audit Committee Financial Expert. Information concerning Synchronoss’ audit committee financial expert is set forth
under the heading “Audit Committee” in the Synchronoss Proxy Statement for the 2024 Annual Meeting of
Stockholders to be filed with the SEC within 120 days of the fiscal year ended December 31, 2023 and is incorporated
herein by reference.
c.
Identification of the Audit Committee. Information concerning the audit committee of Synchronoss is set forth under
the heading “Audit Committee” in the Synchronoss Proxy Statement for the 2024 Annual Meeting of Stockholders to
be filed with the SEC within 120 days of the fiscal year ended December 31, 2023 and is incorporated herein by
reference.
d. Delinquent Section 16(a) Reports. Information concerning non-compliance, if any, with beneficial ownership reporting
requirements is set forth under the caption “Delinquent Section 16(a) Reports” in the Synchronoss Proxy Statement for
the 2024 Annual Meeting of Stockholders to be filed with the SEC within 120 days of the fiscal year ended December
31, 2023 and is incorporated herein by reference.
e.
Information about our Executive Officers. Information concerning the executive officers of Synchronoss is set forth
under the heading “Information about our Executive Officers” in the Synchronoss Proxy Statement for
the 2024 Annual Meeting of Stockholders to be filed with the SEC within 120 days of the fiscal year ended December
31, 2023 and is incorporated herein by reference.
Code of Ethics. Information concerning the Synchronoss Workplace Code of Ethics and Business Conduct is set forth
under the caption “Workplace Code of Ethics and Business Conduct” in the Synchronoss Proxy Statement for the 2024 Annual
Meeting of Stockholders to be filed with the SEC within 120 days of the fiscal year ended December 31, 2023 and is
incorporated herein by reference. The Company intends to disclose on its website any amendments to, or waivers from, its Code
of Business Conduct that are required to be disclosed pursuant to the rules of the SEC. Information contained on, or connected
to, our website is not incorporated by reference into this annual report and should not be considered part of this report or any
other filing that we make with the SEC.
ITEM 11. EXECUTIVE COMPENSATION
Information concerning executive compensation is set forth under the headings “Compensation of Executive Officers” and
“Securities Authorized for Issuance Under Equity Compensation Plans” in the Synchronoss Proxy Statement for
the 2024 Annual Meeting of Stockholders to be filed with the SEC within 120 days of the fiscal year ended December 31, 2023
and is incorporated herein by reference.
115
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
Information concerning shares of Synchronoss equity securities beneficially owned by certain beneficial owners and by
management is set forth under the heading “Equity Security Ownership of Certain Beneficial Owners and Management” in the
Synchronoss Proxy Statement for the 2024 Annual Meeting of Stockholders to be filed with the SEC within 120 days of the
fiscal year ended December 31, 2023 and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Information concerning certain relationships and related transactions is set forth under the heading “Certain Related Party
Transactions” in the Synchronoss Proxy Statement for the 2024 Annual Meeting of Stockholders to be filed with the SEC
within 120 days of the fiscal year ended December 31, 2023 and is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Information concerning fees and services of the Company’s principal accountants is set forth under the heading “Report of
the Audit Committee” and “Independent Registered Public Accounting Firm’s Fees” in the Synchronoss Proxy Statement for
the 2024 Annual Meeting of Stockholders to be filed with the SEC within 120 days of the fiscal year ended December 31, 2023
and is incorporated herein by reference.
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
We have filed the following documents as part of this Form 10-K:
(a)(1) Consolidated Financial Statements:
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Comprehensive (Loss) Income
Consolidated Statements of Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Page No.
58
60
61
62
63
64
66
116
(a)(2) Schedule for the years ended December 31, 2023, 2022, 2021:
Schedule II - Valuation and Qualifying Accounts
December 31, 2023, 2022, 2021:
Allowance for credit losses:
2023
2022
2021
Valuation allowance for deferred tax assets:
2023
2022
2021
Beginning
Balance
Additions
Reductions
(In thousands)
Ending
Balance
$
$
$
$
$
$
51 $
89 $
118 $
61 $
86 $
467 $
(4) $
(124) $
(496) $
108
51
89
Beginning
Balance
Additions
Reductions
(In thousands)
Ending
Balance
63,029 $
68,933 $
69,440 $
11,843 $
(10,807) $
542 $
2,992 $
(6,446) $
(3,499) $
64,065
63,029
68,933
All other Schedules have been omitted because they are not applicable, or the required information is shown in the
Consolidated Financial Statements or of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K
thereto.
(a)(3) Exhibits:
Exhibit No.
2.1
3.1
3.2
3.3
3.4
3.5
3.6
3.7
4.1
Description
Asset Purchase Agreement, dated October 31, 2023, by and
between Synchronoss Technologies, Inc., Critical Path, LLC,
Synchronoss Software Ireland Ltd, Openwave Messaging B.V.,
Synchronoss Technologies Data Centre Ltd, Synchronoss
Technologies Holdings Ltd, Synchronoss Technologies India Pvt.
Ltd, and Synchronoss Technologies France SAS and Lumine
Group Software Solutions (Ireland) Limited, Lumine Group UK
Holdco Ltd, Incognito Software Systems Inc., Lumine Group US
Holdco, Inc., Lumine Group Australia Holdco Pty Ltd, Openwave
Messaging (Ireland) Limited, Razersight Software Solutions
Ireland Limited, Spatial Software Solutions Ireland Limited,
Razorsight Software Solutions US Inc., and Openwave Messaging
US Inc.
Restated Certificate of Incorporation of the Registrant.
Amended and Restated Bylaws of the Registrant.
Amendment No. 1 to the Amended and Restated Bylaws of
Synchronoss Technologies, Inc.
Amendment No. 2 to the Amended and Restated Bylaws of
Synchronoss Technologies, Inc.
Certificate of Designations of the Series B Perpetual Non-
Convertible Preferred Stock.
Certificate of Amendment of
Incorporation of Synchronoss Technologies, Inc.
the Restated Certificate of
Certificate of Amendment of
Incorporation of Synchronoss Technologies, Inc.
the Restated Certificate of
Reference is made to Exhibits 3.1, 3.2, 3.3, 3.4, 3.7 and 3.8.
117
Incorporated by Reference
Form
10-Q
File No.
Exhibit
Filing Date
001-40574
2.1
November 8, 2023
Filed
Herewith
10-K
S-1
8-K
8-K
8-K
8-K
8-K
S-1
001-40574
333-132080
000-52049
000-52049
000-52049
001-40574
001-40574
333-132080
3.1
3.4
3.2
3.3
3.1
3.1
3.1
3.2
March 15, 2023
May 9, 2006
February 20, 2018
June 30, 2021
June 30, 2021
June 23, 2022
December 7, 2023
May 9, 2006
Exhibit No.
Description
Form
File No.
Exhibit
Filing Date
Filed
Herewith
Incorporated by Reference
4.2
4.3
4.4
4.5
4.6
4.7
4.8
10.1
10.2†
10.3†
10.4†
10.5†
10.6†
Form of Common Stock Certificate.
Form of Indenture for Convertible Senior Notes.
Description of Securities Registered under Section 12 of the
Securities Exchange Act of 1934.
Base Indenture, dated as of June 30, 2021, by and between
Synchronoss Technologies, Inc. and The Bank of New York
Mellon Trust Company, N.A., as trustee.
First Supplemental Indenture, dated as of June 30, 2021, by and
between Synchronoss Technologies, Inc. and The Bank of New
York Mellon Trust Company, N.A., as trustee.
Investor Rights Agreement by and between Synchronoss
Technologies, Inc., B. Riley Financial, Inc. and B. Riley Principal
Investments, LLC dated June 30, 2021.
Form of 8.375% Senior Notes due 2026.
Form of Indemnification Agreement between the Registrant and
each of its directors and executive officers.
Synchronoss Technologies, Inc. 2000 Stock Plan and forms of
agreements thereunder.
Amendment No. 1 to Synchronoss Technologies, Inc. 2000 Stock
Plan.
S-1
S-3
333-132080
333-197871
10-K
001-40574
8-K
000-52049
4.2
4.8
4.6
4.1
June 12, 2006
August 5, 2014
March 15, 2022
June 30, 2021
8-K
000-52049
4.2
June 30, 2021
8-K
000-52049
4.3
June 30, 2021
8-K
8-K
S-1
S-1
000-52049
000-52049
4.3
4.2
June 30, 2021
June 30, 2021
333-132080
10.2
February 28, 2006
333-132080
10.3
May 9, 2006
2006 Equity Incentive Plan, as amended and restated.
DEF 14A
000-52049
-
April 8, 2010
2010 New Hire Equity Incentive Plan.
Synchronoss Technologies, Inc. Amended and Restated 2015
Equity Incentive Plan.
S-8
S-8
333-168745
10.4A
August 11, 2010
333-265780
10.1
June 22, 2022
10.7†
2017 New Hire Equity Incentive Plan.
8-K
000-52049
10.1
December 21,
2017
10.8†
10.9†
10.10
10.11†
10.12†
10.13
10.14
10.15
10.16‡
10.17†
10.18†
10.19†
10.20†
10.21†
Amendment No. 1 effective as of November 1, 2021 to
Synchronoss Technologies, Inc. 2017 New Hire Equity Incentive
Plan.
Employee Stock Purchase Plan.
Lease Agreement between the Registrant and Wells Reit-
Bridgewater NJ, LLC for the premises located at 200 Crossing
Boulevard, Bridgewater, New Jersey, dated as of October 27,
2011.
Employment Agreement dated as of April 27, 2017 between the
Registrant and Stephen G. Waldis.
Tier One Executive Employment Plan effective March 24, 2017.
Application Service Provider Agreement retroactively effective as
of April 1, 2013 by and between the Registrant and Verizon
Sourcing LLC.
Change Request No 8 effective January 1, 2018 to SOW No. 1
Application Service Provider Agreement effective as of April 1,
2013 by and between the Registrant and Verizon Sourcing LLC.
At Market Issuance Sales Agreement between Synchronoss
Technologies, Inc. and B. Riley Securities, Inc., dated October 25,
2021.
Change Request No 12 effective August 7, 2020 to SOW No.1
Application Service Provider Agreement effective as of April 1,
2013 by and between the Registrant and Verizon Sourcing LLC.
Tier One Executive Employment Plan Dated April 30, 2021
between the Registrant and Christopher Hill.
Employment agreement dated as of March 8, 2021 between the
Registrant and Jeff Miller.
Tier One Executive Employment Plan Dated April 30, 2021
between the Registrant and Louis Ferraro.
Tier One Executive Employment Plan Dated April 30, 2021
between the Registrant and Christopher Hill.
Tier One Executive Employment Plan dated July 27, 2021
between the Registrant and Christina Gabrys.
10-K
001-40574
4.6
March 15, 2022
10-K
10-K
000-52049
10.5
February 28, 2012
000-52049
10.10
February 28, 2012
10-Q
000-52049
10.4
August 9, 2018
10-Q
10-Q
000-52049
000-52049
10.5
10.12
August 9, 2018
August 9, 2018
10-Q
000-52049
10.13
August 9, 2018
8-K
001-40574
1.1
October 26, 2021
10-Q
000-52049
10.2
November 9, 2020
10-K
001-40574
10.17
March 15, 2023
10-Q
000-52049
10.1
May 5, 2021
10-K
001-40574
10.19
March 15, 2023
10-K
001-40574
10.20
March 15, 2023
10-Q
001-40574
10.2
November 9, 2021
118
Exhibit No.
10.19†
10.20
10.21
10.22
10.23
10.24†
10.25
10.26
10.27
10.28†
10.29
10.30*
21.1
23.1
31.1
31.2
32.1**
32.2**
97.1
Description
Transition and Separation Agreement dated September 2, 2021
between the Registrant and Ronald Prague.
Receivables Purchase Agreements, dated as of June 22, 2022,
among Synchronoss Technologies, Inc., SN Technologies, LLC,
Norddeutsche Landesbank Girozentrale, [the purchasers party
thereto, the group agents party thereto and the originators party
thereto].
Purchase and Sale Agreements, dated as of June 22, 2022,
between Synchronoss Technologies, Inc. and SN Technologies,
LLC.
Administration Agreement, dated as of June 22, 2022, between
Synchronoss Technologies, Inc. and Finacity Corporation.
Performance Guaranty, dated as of June 22, 2022, made by
in favor of Norddeutsche
Synchronoss Technologies, Inc.
Landesbank Girozentrale.
Appointment Letter, dated August 9, 2022 between the Registrant
and Lou Ferraro.
Purchase and Sale Agreements, dated as of June 22, 2022,
between Synchronoss Technologies, Inc. and SN Technologies,
LLC.
Administration Agreement, dated as of June 22, 2022, between
Synchronoss Technologies, Inc. and Finacity Corporation.
Performance Guaranty, dated as of June 22, 2022, made by
in favor of Norddeutsche
Synchronoss Technologies, Inc.
Landesbank Girozentrale.
Appointment Letter, dated August 9, 2022 between the Registrant
and Lou Ferraro.
Order Instituting Cease-And-Desist Proceedings pursuant to
Section 21C of the Securities Exchange Act of 1934, Making
Findings, and Imposing a Cease-And-Desist Order, dated June 7,
2022, between the United States Securities and Exchange
Commission and Synchronoss Technologies, Inc.
Change Request No. 17 effective November 1, 2022 to SOW No.
1 Application Service Provider Agreement effective as of April 1,
2013 by and between the Registrant and Verizon Sourcing LLC.
Incorporated by Reference
Form
10-Q
File No.
Exhibit
Filing Date
001-40574
10.1
November 9, 2021
Filed
Herewith
8-K
001-40574
10.1
June 23, 2022
8-K
001-40574
10.2
June 23, 2022
8-K
8-K
8-K
8-K
8-K
8-K
001-40574
10.3
June 23, 2022
001-40574
10.4
June 23, 2022
001-40574
10.1
August 9, 2022
001-40574
10.2
June 23, 2022
001-40574
10.3
June 23, 2022
001-40574
10.4
June 23, 2022
8-K
001-40574
10-Q
001-40574
10.1
10.1
August 9, 2022
August 9, 2022
8-K
001-40574
10.1
November 7, 2022
List of subsidiaries.
10-K
000-52049
21.1
July 2, 2018
Consent of Ernst & Young, LLP, Independent Registered Public
Accounting Firm.
to
Certification of Principal Executive Officer pursuant
Rule 13a-14(a) of the Exchange Act, as adopted pursuant to
section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Principal Financial Officer pursuant
to
Rule 13a-14(a) of the Exchange Act, as adopted pursuant to
section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Principal Executive Officer pursuant
to
Rule 13a-14(b) of the Exchange Act and section 18 U.S.C.
Section 1350, as adopted pursuant to section 906 of the
Sarbanes-Oxley Act of 2002.
to
Certification of Principal Financial Officer pursuant
Rule 13a-14(b) of the Exchange Act and section 18 U.S.C.
Section 1350, as adopted pursuant to section 906 of the
Sarbanes-Oxley Act of 2002.
Compensation Recoupment Policy.
101.INS
XBRL Instance Document
101.SCH
XBRL Schema Document
101.CAL
XBRL Calculation Linkbase Document
101.DEF
XBRL Taxonomy Extension Definition Linkbase
119
X
X
X
X
X
X
X
X
X
X
Exhibit No.
Description
Form
File No.
Exhibit
Filing Date
Incorporated by Reference
101.LAB
XBRL Labels Linkbase Document
101.PRE
XBRL Presentation Linkbase Document
_____________________________
Filed
Herewith
X
X
†
‡
**
Compensation Arrangement.
Confidential treatment has been granted with respect to certain provisions of this exhibit.
This certification is being furnished solely to accompany this Annual Report pursuant to 18 U.S.C. Section 1350, and is not being filed for purposes of
Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the registrant, whether
made before or after the date hereof, regardless of any general incorporation language in such filing.
(b) Exhibits.
See (a)(3) above.
(c) Financial Statement Schedule.
See (a)(2) above.
ITEM 16. FORM 10-K SUMMARY
None.
120
SIGNATURES
Pursuant to the requirements of Securities Exchange Act of 1934, the registrant has caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
SYNCHRONOSS TECHNOLOGIES, INC.
(Registrant)
/s/ Jeff Miller
Jeff Miller
Chief Executive Officer
(Principal Executive Officer)
/s/ Louis Ferraro
Louis Ferraro
Chief Financial Officer
March 25, 2024
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
/s/ Jeff Miller
Jeff Miller
/s/ Louis Ferraro
Louis Ferraro
/s/ Stephen Waldis
Stephen Waldis
/s/ Laurie L. Harris
Laurie L. Harris
/s/ Kristin S. Rinne
Kristin S. Rinne
/s/ Mohan Gyani
Mohan Gyani
/s/ Martin Bernstein
Martin Bernstein
/s/ Kevin Rendino
Kevin Rendino
Title
Date
Chief Executive Officer
March 25, 2024
(Principal Executive Officer)
Chief Financial Officer
March 25, 2024
(Principal Financial Officer)
Director
Executive Chairman
Director
Director
Director
Director
Director
121
March 25, 2024
March 25, 2024
March 25, 2024
March 25, 2024
March 25, 2024
March 25, 2024
[This page intentionally left blank]
Board of Directors
Stephen G. Waldis 4
Founder & Chairman
Kristin Rinne 1,2,3
Retired, SVP Network & Product
Synchronoss Technologies, Inc.
Planning, AT&T
Jeff Miller 4
President & Chief Executive Officer
Synchronoss Technologies, Inc.
Kevin M. Rendino 1,4
Chairman & CEO
180 Degree Capital
Laurie L. Harris 1,3
Retired, Partner PwC
Martin Bernstein1,2,4
Private Equity Investor
Mohan Gyani 2,4
Retired, President & CEO
AT&T Wireless Mobility Services
Management
Jeff Miller
President & Chief Executive Officer
Lou Ferraro
Chief Financial Officer
Christina Gabrys
Chief Legal Officer
Patrick Doran
Chief Technology Officer
Mina Lackner
Chief Human Resources Officer
1 Audit Committee
2 Compensation Committee
3 Nominating / Corporate Guidance Committee
4 Business Development Committee
For address changes, consolidation,
lost or replacement certificates, contact:
Virtual Annual Meeting
Transfer Agent and Registrar
Equiniti
6201 15th Avenue
Brooklyn, NY, 11219
800.937.5449
Outside of the US +01.718.921.8200 x 4801
Common Stock
Synchronoss Technologies, Inc. is listed on
NASDAQ under the ticker symbol “SNCR”
June 5, 2024 at 11am and the link is
www.virtualshareholdermeeting.com/SNCR2024
Auditors
Ernst & Young LLP
Iselin, NJ 08830
Investor Relations
Matt Glover or Tom Colton
Gateway Group Inc.
949.574.3860
investor@synchronoss.com
Headquarters
Synchronoss Technologies
200 Crossing Blvd, 8th floor
Bridgewater, NJ 08807
Key International Locations
Synchronoss Technologies
The Academy
42 Pearse Street, 1st floor
Dublin 2, Ireland
Synchronoss Technologies
Subramayna No 12 Bannerghatta Road
Bangalore, India 560076