SYNCHRONOSS TECHNOLOGIES INC [SNCR] Filings

10-Q 1 sncr-20240630.htm 10-Q sncr-20240630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024


☐			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			06-1594540
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

200 Crossing Boulevard, 8th Floor Bridgewater, New Jersey			08807
(Address of principal executive offices)			(Zip Code)

(866) 620-3940

(Registrant’s telephone number, including area code)

(Former name, former address, and former fiscal year, if changed since last report)

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 x 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 x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $.0001 par value

SNCR

The Nasdaq Stock Market, LLC

8.375% Senior Notes due 2026

SNCRL

The Nasdaq Stock Market, LLC

As of August 6, 2024, there were 10,818,169 shares of common stock issued and outstanding.

Table of Contents

SYNCHRONOSS TECHNOLOGIES, INC.

FORM 10-Q INDEX


		Page No.
PART I.	FINANCIAL INFORMATION	3
Item 1.	Condensed Consolidated Financial Statements and Notes	3
	Condensed Consolidated Balance Sheets (unaudited)	3
	Condensed Consolidated Statements of Operations (unaudited)	4
	Condensed Consolidated Statements of Comprehensive (Loss) Income (unaudited)	5
	Condensed Consolidated Statements of Stockholders’ Equity (unaudited)	6
	Condensed Consolidated Statements of Cash Flows (unaudited)	8
	Notes to Condensed Consolidated Financial Statements (unaudited)	10
	Note 1. Description of Business	10
	Note 2. Basis of Presentation and Consolidation	10
	Note 3. Revenue	12
	Note 4. Divestitures and Discontinued Operations	15
	Note 5. Accounts Receivable Securitization Facility	17
	Note 6. Fair Value Measurements	18
	Note 7. Note receivable	18
	Note 8. Leases	19
	Note 9. Debt	22
	Note 10. Accumulated Other Comprehensive Income	26
	Note 11. Capital Structure	26
	Note 12. Stock Plans	28
	Note 13. Restructuring	29
	Note 14. Income Taxes	29
	Note 15. Earnings Per Common Share	30
	Note 16. Commitments	32
	Note 17. Legal Matters	32
	Note 18. Additional Financial Information	33


Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	34

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	41
Item 4.	Controls and Procedures	42

PART II.	OTHER INFORMATION	43
Item 1.	Legal Proceedings	43
Item 1A.	Risk Factors	43
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	45
Item 3.	Defaults Upon Senior Securities	45
Item 4.	Mine Safety Disclosures	45
Item 5.	Other Information	45
Item 6.	Exhibits	46
SIGNATURES		47

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND NOTES

SYNCHRONOSS TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited) (In thousands)


	June 30, 2024		December 31, 2023

ASSETS
Current assets:
Cash and cash equivalents	$	23,648	$	24,572


Accounts receivable, net	19,859		23,477
Prepaid & other current assets	32,013		33,953



Total current assets	75,520		82,002
Non-current assets:

Property and equipment, net	3,297		3,673
Operating lease right-of-use assets	10,702		14,791
Goodwill	181,574		183,908
Intangible assets, net	20,908		22,214


Other assets, non-current	3,671		3,749



Total non-current assets	220,152		228,335
Total assets	$	295,672	$	310,337
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	7,976	$	7,475
Accrued expenses	31,491		39,127
Deferred revenues, current	1,059		1,095
Debt, current	1,875		—



Total current liabilities	42,401		47,697



Long-term debt, net of debt issuance costs	184,357		136,215
Deferred tax liabilities	4,165		3,207


Leases, non-current	20,255		23,593
Other liabilities, non-current	1,375		1,691

Total liabilities	252,553		212,403
Commitments and contingencies:

Series B Non-Convertible Perpetual Preferred stock, $0.0001 par value; 150 shares authorized, 0 and 61 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively	—		58,802
Redeemable non-controlling interest	12,500		12,500
Stockholders’ equity:
Common stock, $0.0001 par value; 16,667 shares authorized, 10,815 and 10,314 issued and outstanding at June 30, 2024 and December 31, 2023, respectively	1		1

Additional paid-in capital	491,808		483,527
Accumulated other comprehensive loss	(34,007)		(25,732)
Accumulated deficit	(427,183)		(431,164)
Total stockholders’ equity	30,619		26,632
Total liabilities and stockholders’ equity	$	295,672	$	310,337

See accompanying notes to condensed consolidated financial statements.

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SYNCHRONOSS TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited) (In thousands, except per share data)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023


Net revenues	$	43,458	$	41,019	$	86,423	$	83,004
Costs and expenses:
Cost of revenues1	10,401		11,488		20,624		22,448
Research and development	11,896		13,274		22,227		26,018
Selling, general and administrative	12,788		17,256		26,045		33,222
Restructuring charges	48		21		267		363
Depreciation and amortization	4,028		4,064		8,387		7,996
Total costs and expenses	39,161		46,103		77,550		90,047
Income (loss) from operations	4,297		(5,084)		8,873		(7,043)
Interest income	183		127		391		221
Interest expense	(3,486)		(3,461)		(7,003)		(6,915)

Other income (expense), net	1,220		(268)		5,031		(3,243)

Income (loss) from continuing operations, before taxes	2,214		(8,686)		7,292		(16,980)
Provision for income taxes	(2,708)		(532)		(3,311)		(827)
Net (loss) income from continuing operations	(494)		(9,218)		3,981		(17,807)
Discontinued operations (Note 4):
Income (loss) from discontinued operations, before taxes	—		951		—		(627)

Provision for income taxes	—		(251)		—		(1,015)
Net income (loss) from discontinued operations	—		700		—		(1,642)
Net (loss) income	(494)		(8,518)		3,981		(19,449)
Net income attributable to redeemable non-controlling interests	5		14		—		28
Preferred stock dividend and gain on repurchase of preferred stock	567		(2,475)		(1,562)		(4,949)
Net income (loss) attributable to Synchronoss	$	78	$	(10,979)	$	2,419	$	(24,370)



Earnings (loss) per share:
Basic:
Net income (loss) from continuing operations	$	0.01	$	(1.21)	$	0.24	$	(2.35)
Net income (loss) from discontinued operations	—		0.08		—		(0.17)
Basic	$	0.01	$	(1.13)	$	0.24	$	(2.52)
Diluted:
Net income (loss) from continuing operations	$	0.01	$	(1.21)	$	0.24	$	(2.35)
Net income (loss) from discontinued operations	—		0.08		—		(0.17)
Diluted	$	0.01	$	(1.13)	$	0.24	$	(2.52)
Weighted-average common shares outstanding:
Basic	10,042		9,685		9,942		9,669
Diluted	10,424		9,685		10,265		9,669

________________________________

1 Cost of revenues excludes depreciation and amortization which are shown separately.

See accompanying notes to condensed consolidated financial statements.

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SYNCHRONOSS TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(Unaudited) (In thousands)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Net (loss) income:	$	(494)	$	(8,518)	$	3,981	$	(19,449)
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments	(2,166)		171		(8,275)		4,741



Comprehensive loss	(2,660)		(8,347)		(4,294)		(14,708)
Comprehensive income attributable to redeemable non-controlling interests	5		14		—		28
Comprehensive loss attributable to Synchronoss	$	(2,655)	$	(8,333)	$	(4,294)	$	(14,680)

See accompanying notes to condensed consolidated financial statements.

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SYNCHRONOSS TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited) (In thousands)


	Three Months Ended June 30, 2024
	Common Stock
	Shares	Par Value		Additional Paid-In Capital		Accumulated Other Comprehensive (Loss) Income		Accumulated deficit		Total Stockholders' Equity
Balance at March 31, 2024	10,315	$	1	$	482,492	$	(31,841)	$	(426,694)	$	23,958
Stock-based compensation	—	—		893		—		—		893
Issuance of restricted stock	500	—		—		—		—		—

Preferred stock dividend	—	—		(2,129)		—		—		(2,129)








Shares withheld for taxes in connection with issuance of restricted stock	—	—		(1)		—		—		(1)



Net loss	—	—		—		—		(494)		(494)
Non-controlling interest	—	—		(5)		—		5		—
Total other comprehensive loss	—	—		—		(2,166)		—		(2,166)

Gain on Series B Preferred stock repurchase	—	—		2,696		—		—		2,696
Gain on Senior Notes repurchase	—	—		7,862		—		—		7,862


Balance at June 30, 2024	10,815	$	1	$	491,808	$	(34,007)	$	(427,183)	$	30,619


	Three Months Ended June 30, 2023
	Common Stock
	Shares	Par Value		Additional Paid-In Capital		Accumulated Other Comprehensive (Loss) Income		Accumulated deficit		Total Stockholders' Equity
Balance at March 31, 2023	10,436	$	1	$	487,681	$	(39,561)	$	(387,546)	$	60,575
Stock-based compensation	—	—		1,526		—		—		1,526
Issuance of restricted stock	13	—		—		—		—		—



Preferred stock dividend	—	—		(2,475)		—		—		(2,475)






Shares withheld for taxes in connection with issuance of restricted stock	(16)	—		(131)		—		—		(131)



Net loss	—	—		—		—		(8,518)		(8,518)
Non-controlling interest	—	—		(14)		—		14		—
Total other comprehensive income	—	—		—		171		—		171





Balance at June 30, 2023	10,433	$	1	$	486,587	$	(39,390)	$	(396,050)	$	51,148

See accompanying notes to condensed consolidated financial statements.

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	Six Months Ended June 30, 2024
	Common Stock
	Shares	Par Value		Additional Paid-In Capital		Accumulated Other Comprehensive (Loss) Income		Accumulated deficit		Total Stockholders' Equity
Balance at December 31, 2023	10,314	$	1	$	483,527	$	(25,732)	$	(431,164)	$	26,632
Stock-based compensation	—	—		1,982		—		—		1,982
Issuance of restricted stock	501	—		—		—		—		—

Preferred stock dividend	—	—		(4,258)		—		—		(4,258)








Shares withheld for taxes in connection with issuance of restricted stock	—	—		(1)		—		—		(1)



Net income	—	—		—		—		3,981		3,981

Total other comprehensive loss	—	—		—		(8,275)		—		(8,275)

Gain on Series B Preferred stock repurchase	—	—		2,696		—		—		2,696
Gain on Senior Notes repurchase	—	—		7,862		—		—		7,862


Balance at June 30, 2024	10,815	$	1	$	491,808	$	(34,007)	$	(427,183)	$	30,619


	Six Months Ended June 30, 2023
	Common Stock
	Shares	Par Value		Additional Paid-In Capital		Accumulated Other Comprehensive (Loss) Income		Accumulated deficit		Total Stockholders' Equity
Balance at December 31, 2022	10,137	$	1	$	488,856	$	(44,131)	$	(376,629)	$	68,097
Stock-based compensation	—	—		2,840		—		—		2,840
Issuance of restricted stock	312	—		—		—		—		—

Preferred stock dividend	—	—		(4,949)		—		—		(4,949)






Shares withheld for taxes in connection with issuance of restricted stock	(16)	—		(132)		—		—		(132)



Net loss	—	—		—		—		(19,449)		(19,449)
Non-controlling interest	—	—		(28)		—		28		—
Total other comprehensive income	—	—		—		4,741		—		4,741







Balance at June 30, 2023	10,433	$	1	$	486,587	$	(39,390)	$	(396,050)	$	51,148

See accompanying notes to condensed consolidated financial statements.

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SYNCHRONOSS TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited) (In thousands)


	Six Months Ended June 30,
	2024		2023
Operating activities:
Net income (loss) from continuing operations	$	3,981	$	(17,807)
Net loss from discontinued operations	—		(1,642)



Adjustments to reconcile net income (loss) to net cash from operating activities:
Depreciation and amortization	8,387		14,459



Amortization of debt issuance costs	836		748










Amortization of debt discount	52		47
Sublease receivable impairment	806		—
Deferred income taxes	961		10

Stock-based compensation	2,355		3,364


Operating lease impairment, net	2,278		2,075
Other, net	(5,334)		2,743
Changes in operating assets and liabilities:
Accounts receivable, net	2,715		7,328
Prepaid expenses and other current assets	1,868		(2,275)
Accounts payable	783		(2,478)
Accrued expenses	(6,358)		(1,221)

Other assets	51		321
Deferred revenues	(11)		9,344
Other liabilities	(1,530)		(2,460)

Net cash provided by operating activities	$	11,840	$	12,556

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SYNCHRONOSS TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited) (In thousands) (Continued)


	Six Months Ended June 30,
	2024		2023











































Investing activities:
Purchases of fixed assets	$	(896)	$	(994)
Additions to capitalized software	(6,614)		(9,350)











Net cash used in investing activities	(7,510)		(10,344)

Financing activities:

Taxes paid on withholding shares	(1)		(132)



Debt issuance costs related to Term Loan	(6,746)		—


Proceeds from issuance of long Term Loan	75,000		—
Repurchase of Senior Notes and related costs	(11,524)		—

Drawdown on A/R Facility	6,000		3,500
Repayment of A/R Facility	(6,000)		(3,500)






Series B Preferred dividend paid in the form of cash	(4,258)		(4,772)
Repurchase of Series B Preferred stock	(57,576)		—


Net cash used in financing activities	(5,105)		(4,904)

Effect of exchange rate changes on cash	(149)		100

Net decrease in cash and cash equivalents	(924)		(2,592)
Beginning cash and cash equivalents of continuing operations	24,572		18,310
Beginning cash and cash equivalents of discontinued operations	—		3,611
Beginning cash and cash equivalents	24,572		21,921
Ending cash and cash equivalents of continuing operations	23,648		15,342
Ending cash and cash equivalents of discontinued operations	—		3,987
Ending cash and cash equivalents	$	23,648	$	19,329

See accompanying notes to condensed consolidated financial statements.

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SYNCHRONOSS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED

(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 software and services 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) had powered mobile messaging and mailboxes for hundreds of millions of telecommunication subscribers. Our Advanced Messaging platform had been a powerful, secure, intelligent, white label messaging platform that expanded capabilities for communications service provider and multi-service providers to offer P2P messaging via Rich Communications Services (“RCS”). Our Mobile Messaging Platform (“MMP”) provided 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 had provided operators with the tools and software to design their physical network, streamlined their infrastructure purchases, and managed and optimized comprehensive network expenses for leading top tier carriers around the globe.

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 represented 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 income (loss) from discontinued operations, before taxes in the Consolidated Statements of Operations for prior periods presented. There were no assets and liabilities related to discontinued operations as of June 30, 2024 and December 31, 2023, as all balances were transferred to Lumine Group upon sale. 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 1 of this Form 10-Q.

Note 2. Basis of Presentation and Consolidation

Basis of Presentation and Consolidation

The accompanying interim unaudited condensed consolidated financial statements have been prepared by Synchronoss and in the opinion of management, include all adjustments necessary for a fair presentation of the Company’s financial position, results of operations and cash flows for the interim periods. They do not include all of the information and footnotes required by U.S. generally accepted accounting principles (“GAAP”) for complete financial statements and should be read in conjunction with the Company’s audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. The results of operations for the three and six months ended June 30, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024.

The condensed 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

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SYNCHRONOSS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED

(Amounts in tables in thousands, except for per share data or unless otherwise noted)

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.

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. We have reclassified certain prior year amounts to conform with current year presentation. 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 the six months ended June 30, 2023. For supplemental cash flow disclosures, see Note 4. Divestitures and Discontinued Operations of the Notes to Consolidated Financial Statements in Item 1 of this Form 10-Q.

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 Earnings Per Share (“EPS”) for all periods presented on the Consolidated Statement of Operations. For additional information, see Note 11. Capital Structure of the Notes to Consolidated Financial Statements in Item 1 of this Form 10-Q.

For further information about the Company’s basis of presentation and consolidation or its significant accounting policies, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

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SYNCHRONOSS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED

(Amounts in tables in thousands, except for per share data or unless otherwise noted)

Recently Issued Accounting Standards

Standards issued not yet adopted

Standard

Description

Effect on the financial statements

Update 2024-01 - Compensation—Stock Compensation
(Topic 718) - Scope Application of Profits Interest and Similar Awards

The amendments in this Update related to the scope application issue apply to all reporting entities that account for profits interest awards as compensation to employees or nonemployees in return for goods or services. This Update provides specific examples to help stakeholders to determine whether a profits interest award should be accounted for as a share-based payment arrangement (Topic 718) or similar to a cash bonus or profit-sharing arrangement (Topic 710, Compensation—General, or other Topics).

The Company continues to evaluate these changes and does not anticipate any material impact on the Company’s consolidated financial position or results of operations upon adoption.

Planned date of adoption: January 1, 2025

Update 2023-09 - Income Taxes (Topic 740) - Improvements to Income Tax Disclosures

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.

The Company continues to evaluate these changes and does not anticipate any material impact on the Company’s consolidated financial position or results of operations upon adoption.

Planned date of adoption: January 1, 2025

Update 2023-07 - Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures

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 material impact on the Company’s consolidated financial position or results of operations upon adoption.

Planned date of adoption: January 1, 2025

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 technology, media, and telecom (“TMT”) sector.

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SYNCHRONOSS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED

(Amounts in tables in thousands, except for per share data or unless otherwise noted)


	Three Months Ended June 30, 2024								Three Months Ended June 30, 2023
	Cloud		NetworkX		Messaging2		Total		Cloud		NetworkX1		Messaging2		Total
Geography:
Americas	$	40,252	$	—	$	62	$	40,314	$	37,546	$	424	$	158	$	38,128
APAC	1,605		—		—		1,605		1,147		—		—		1,147
EMEA	1,539		—		—		1,539		1,744		—		—		1,744
Total	$	43,396	$	—	$	62	$	43,458	$	40,437	$	424	$	158	$	41,019

Service Line:
Professional Services	$	4,089	$	—	$	—	$	4,089	$	4,369	$	—	$	(51)	$	4,318
Transaction Services	—		—		—		—		58		—		—		58
Subscription Services	39,307		—		13		39,320		36,010		424		209		36,643
License	—		—		49		49		—		—		—		—
Total	$	43,396	$	—	$	62	$	43,458	$	40,437	$	424	$	158	$	41,019


	Six Months Ended June 30, 2024								Six Months Ended June 30, 2023
	Cloud		NetworkX		Messaging2		Total		Cloud		NetworkX1		Messaging2		Total
Geography:
Americas	$	79,831	$	—	$	124	$	79,955	$	74,960	$	818	$	671	$	76,449
APAC	3,153		—		—		3,153		2,794		—		—		2,794
EMEA	3,315		—		—		3,315		3,761		—		—		3,761
Total	$	86,299	$	—	$	124	$	86,423	$	81,515	$	818	$	671	$	83,004

Service Line:
Professional Services	$	7,862	$	—	$	—	$	7,862	$	9,030	$	—	$	(51)	$	8,979
Transaction Services	—		—		—		—		185		—		—		185
Subscription Services	78,437		—		26		78,463		71,896		818		722		73,436
License	—		—		98		98		404		—		—		404
Total	$	86,299	$	—	$	124	$	86,423	$	81,515	$	818	$	671	$	83,004

_____________________________

1 Includes revenue recognized in prior periods associated with residual NetworkX contracts not included in the Asset Purchase Agreement with Lumine Group.

2 Includes revenue recognized in the current and prior periods associated with residual Messaging contracts not included in the Asset Purchase Agreement with Lumine Group.

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 Accounts receivable, net in its Consolidated Balance Sheets 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.

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SYNCHRONOSS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED

(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 was $0.1 million and $1.2 million as of June 30, 2024 and December 31, 2023, respectively.

Amounts collected in advance of services being provided are accounted for as contract liabilities, which are presented as Deferred revenue, current on the accompanying Consolidated Balance Sheets 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 non-current) during the period are as follows:


	Contract Liabilities1
Balance at December 31, 2023	$	1,095
Revenue recognized in the period	(86,353)
Amounts billed but not initially recognized as revenue	86,317


Balance at June 30, 2024	$	1,059

________________________________

1 Comprised of Deferred Revenue. $1.0 million of revenue recognized in the period was included in the contract liability balance at the beginning of the period.

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 June 30, 2024. 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 June 30, 2024, the aggregate amount of transaction price allocated to remaining performance obligations, other than those meeting the exclusion criteria above, was $197.6 million, of which approximately 66.6% is expected to be recognized as revenues within 2 years, and the remainder thereafter.

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SYNCHRONOSS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED

(Amounts in tables in thousands, except for per share data or unless otherwise noted)

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 “Lumine 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 Lumine Closing Date, (ii) an additional $7,200,000 was deposited by Buyer into an escrow account on the Lumine 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 Lumine Closing Date for the initial portion of the net tangible asset reconciliation and 300 days or more following the Lumine Closing Date for reconciliation of certain specified assets to be completed, (iii) an additional $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 Lumine 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 dividends.

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. During the fourth quarter of 2023 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 Company received $31.3 million in cash proceeds from the sale of 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 in the fourth quarter of 2023.

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SYNCHRONOSS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED

(Amounts in tables in thousands, except for per share data or unless otherwise noted)

The following tables set forth details of net income (loss) from discontinued operations for the three and six months ended June 30, 2024 and 2023, respectively, related to Messaging and NetworkX Businesses sale.


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023

Net revenues	$	—	$	18,694	$	—	$	34,417
Costs and expenses:
Cost of revenues1	—		10,294		—		19,715
Research and development	—		1,769		—		3,760
Selling, general and administrative	—		2,619		—		4,962
Restructuring charges	—		—		—		3
Depreciation and amortization	—		2,875		—		6,463
Total costs and expenses	—		17,557		—		34,903
Income (loss) from operations	—		1,137		—		(486)
Interest income	—		—		—		1


Other expense, net	—		(186)		—		(142)

Income (loss) from operations, before taxes	—		951		—		(627)

Provision for income taxes	—		(251)		—		(1,015)
Net income (loss)	$	—	$	700	$	—	$	(1,642)

_____________________________

1 Cost of revenues excludes depreciation and amortization which are shown separately.

There were no assets and liabilities related to discontinued operations as of June 30, 2024 and December 31, 2023, as all balances were transferred to Lumine Group upon sale.

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 six months ended June 30, 2024 and 2023:


	Six Months Ended June 30,
	2024		2023
Operating activities:
Depreciation and amortization	$	—	$	6,463
Stock-based compensation	—		513

Investing activities:
Additions to capitalized software	$	—	$	(2,635)

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 “iQmetrix Transaction”). The purchase price is payable as follows: (i) $7.5 million on the iQmetrix closing date of the iQmetrix Transaction, (ii) $0.5 million deposited into an escrow account on the iQmetrix Closing Date, (iii) $1 million paid twelve (12) months from the iQmetrix 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

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SYNCHRONOSS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED

(Amounts in tables in thousands, except for per share data or unless otherwise noted)

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.

Note 5. Accounts Receivable Securitization Facility

On June 23, 2022 (the “A/R 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.

The A/R Facility transaction includes (i) Receivables Purchase Agreements (the “Receivables Purchase Agreements”) dated as of the A/R 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 A/R 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 A/R Closing Date, between the Company, as servicer, and Finacity Corporation, as administrator; and (iv) the Performance Guaranty (the “Performance Guaranty”) dated as of the A/R 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.

For the six months ended June 30, 2024 the Company drew $6.0 million on the A/R Facility, and had repaid the balance in full as of June 30, 2024. For the six months ended June 30, 2023 the Company drew $3.5 million on the A/R Facility, and had repaid the balance in full as of June 30, 2023. The interest associated with the draw and repayment was not material for the period. The drawdown and subsequent repayment of the A/R Facility represent financing activities, as reported in the Consolidated Statements of Cash Flows. As of June 30, 2024 approximately $4.9 million of the Company’s receivables are held by SN Technologies. As of June 30, 2024 there were no outstanding borrowings against the A/R facility and $5.3 million was available for the Company to draw under the A/R Facility.

The Company drew $3.0 million on the A/R Facility on July 3, 2024, and had repaid the balance in full on July 12, 2024.

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SYNCHRONOSS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED

(Amounts in tables in thousands, except for per share data or unless otherwise noted)

Note 6. 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 following is a summary of assets and liabilities, and their related classifications under the fair value hierarchy:


	June 30, 2024
	Total		(Level 1)		(Level 2)		(Level 3)
Assets
Money market accounts1	$	2,000	$	2,000	$	—	$	—


Total assets	$	2,000	$	2,000	$	—	$	—
Liabilities
Performance-based cash units2	$	807	$	—	$	807	$	—

Total liabilities	$	807	$	—	$	807	$	—


	December 31, 2023
	Total		(Level 1)		(Level 2)		(Level 3)
Assets
Money market accounts1	$	12,500	$	12,500	$	—	$	—


Total assets	$	12,500	$	12,500	$	—	$	—
Liabilities
Performance-based cash units2,3	$	434	$	—	$	434	$	—

Total liabilities	$	434	$	—	$	434	$	—

________________________________

1 Included in Cash and cash equivalents on the Consolidated Balance Sheets.

2 Included in Accrued expenses on the Consolidated Balance Sheets.

3 For a discussion of performance-based cash units see Note 12. Stock Plans of the Notes to Condensed Consolidated Financial Statements in Item 1 of this Form 10-Q.

Refer to Note 9. Debt of the Notes to Condensed Consolidated Financial Statements in Item 1 of this Form 10-Q for presentation of Fair Value of Debt.

Note 7. 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

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SYNCHRONOSS TECHNOLOGIES INC [SNCR] Filings

SYNCHRONOSS TECHNOLOGIES INC [SNCRL] Filings