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Nov. 4, 2025 at 4:30 p.m. ET Call participants Chief Executive Officer — Jeffrey George MillerChief Financial Officer — Louis W. FerraroSenior Vice President, Investor Relations — Ryan Gardella Need a quote from a Motley Fool analyst? Email [email protected] Revenue fell to $42 million, down from $43 million in the prior year period, due to delayed new customer contracts and weaker subscriber growth with certain customers.The company reduced full-year revenue guidance to $169 million-$172 million and adjusted EBITDA guidance to $50 million-$53 million, citing continued subscriber headwinds anticipated in the fourth quarter.Subscriber growth decelerated to approximately one percent year-over-year, sequentially down from three percent growth in the previous quarter, impacted by long sales cycles and pressure at key customers.One-time items, including a $5.2 million IRS interest income event, contributed materially to net income, making underlying profitability less repeatable near term. Total revenue -- $42 million, flat sequentially and down $1 million year-over-year, reflecting timing of contract awards and subscriber weakness.Recurring revenue -- 93.8% of total revenue, demonstrating continued reliance on predictable, subscription-based income streams.Adjusted EBITDA -- $12 million, resulting in a 28.5% margin, consistent with stated targets for high-margin SaaS operations.Net income -- $5.8 million, or $0.51 per diluted share, supported by a $5.2 million one-time interest income tied to a tax refund.Adjusted gross profit -- $33.4 million, representing a 79.5% adjusted margin, compared to $34.2 million and a 79.6% adjusted margin the prior year.Operating expenses -- Decreased 3.5% to $36.1 million, reflecting proactive cost management efforts.Free cash flow -- $36 million reported, driven primarily by tax refund receipt, while adjusted free cash flow stood at $4.2 million.Debt repayment -- $25.4 million term loan prepaid at par following receipt of a $33.9 million tax refund, with total debt reduction exceeding $100 million over four years.Net debt -- Reduced to $139.8 million, now representing 2.7x anticipated 2025 adjusted EBITDA, further improving capital structure.Revenue guidance -- Lowered to $169 million-$172 million for 2025, incorporating expected softer subscriber contributions and new contract timing.Adjusted EBITDA guidance -- Projected at $50 million-$53 million, with adjusted gross margin maintained between 78%-80% for 2025.Customer penetration -- Less than two percent subscriber penetration at both AT&T (NYSE:T) and SoftBank (TYO:9434) indicated, described as providing a substantial growth runway.Pipeline and contracts -- Management stated that "we expect to have a new customer launch this year. An additional one launch in 2026," with pipeline opportunities in multiple global regions.AI initiatives -- Significant in-house development progress acknowledged, particularly a hybrid cloud AI model for advanced content intelligence and photo tagging, driving future product innovation and cost savings.Interest expense and income detail -- CFO Ferraro said, "$1.7 million. That was the deferred issuance cost as it relates to that line item," and identified $5.2 million as interest income related to the tax refund.Verizon (NYSE:VZ) -- Transition to MyPlan Perks portfolio created near-term subscriber growth pressure, but management expects the focus on premium perks and new initiatives to drive sustainable growth. Management emphasized that more than 90% of projected revenue is contracted with Tier one carriers, supporting future visibility. Operational discipline, including ongoing use of AI for internal efficiencies, underpins management’s continued cost control ambitions. Cash and cash equivalents reached $34.8 million, which the company intends to allocate to product expansion and potential inorganic growth rather than share repurchases. Strategic advancements with major customers such as AT&T, Verizon, and SoftBank were highlighted as key to longer-term growth, with current low penetration levels targeted for improvement in 2026 and beyond. Management stated, "We are seeing those conversations progress very well with new customer prospects. It is just taking some additional time to get through the contracts," clarifying ongoing sales cycle extensions.The company does not expect further scheduled amortization payments on debt before 2028, freeing up additional cash for operations or investment.Continued foreign exchange gains were noted but described as non-cash and immaterial to core performance.The company excluded $33.9 million in tax-related proceeds and $4.4 million in transaction fees from its free cash flow and guidance disclosures, distinguishing between operational and one-time financial impacts.Recent AI-driven enhancements have established a foundation for next-generation features, including memory-based photo curation and improved user engagement, which management expects will bolster monthly active user growth among carrier partners over time. Industry glossary ARPU: Average revenue per user, commonly used by telecom and software-as-a-service providers to measure per-user income from service offerings.SDK: Software development kit, a set of tools that allows partners or customers to develop applications or integrations using Synchronoss technologies.Capsule: Synchronoss's branded cloud storage and content management solution intended for global carrier partners and direct-to-market opportunities.PERC (or Perks): In this context, refers to value-added service bundles (e.g., Verizon’s MyPlan Perks) where cloud features are offered as customer-selectable benefits.CARES Act refund: Federal tax refund under the U.S. Coronavirus Aid, Relief, and Economic Security Act, which resulted in a material inflow and interest benefit for Synchronoss Technologies. Full Conference Call Transcript Jeffrey George Miller: Thanks, Ryan. Welcome, everyone, and thank you for joining today's call. While revenue in the third quarter was slightly below our expectations, primarily due to subscriber growth weakness among certain customers and delayed timing of new customer contracts, we are pleased with our profitability performance, including strong EBITDA results. Net income of $5.8 million and diluted earnings per share of $0.51. The sustained growth of our cloud-based business model was evident with recurring revenue representing more than 93% of total revenue. Our disciplined execution of key initiatives across the organization continues to enhance the company's financial strength and support sustained progress in the profitability of our more predictable and stable business model. While we continue to operationalize our costs, we reflect rapidly the changes of the economic environment, we have further focused on solidifying our balance sheet. To enable greater operational flexibility for our future, this year, we completed a strategic $200 million four-year term loan refinancing, retiring our senior notes and prior term loan, strengthening our capital structure and extending our debt maturities to 2029. This was followed by the completion of our CARES Act refund process, resulting in the receipt of $33.9 million of the total outstanding balance of the refund owned to the company. This long-awaited refund enabled us to make a $25.4 million prepayment at par on our term loan, adding to the total of $100 million of debt reduction over the past four years, and we placed an additional $8.5 million of cash in organic investments to accelerate our growth. Among those potential avenues, we are exploring new product adjacencies to maximize our total addressable market outside the core mobile market. Turning to Q3 results, revenue for the quarter was $42 million, consistent with results in Q1 and Q2, and included a year-over-year subscriber growth rate of approximately 1% across our global customer base. While our subscriber growth count was lower than we expected in the quarter, we believe that new customer contracts combined with the strategic changes to how some of our key existing customers are intending to regain market share should have a positive impact on our subscriber and revenue growth going forward. As I have mentioned in the past, our service is extremely profitable for our carrier partners. In their efforts to increase ARPU, should ultimately be a positive net for Synchronoss. We delivered $12 million in adjusted EBITDA, which resulted in an adjusted EBITDA margin of 28.5% in the quarter. Those results combined with our year-over-year reduction in operating expenses further demonstrate the resilience of our high-margin SaaS business model and our team's disciplined approach to cost management, even while facing some revenue headwinds. Our recurring revenue grew to 93.8% of total revenue, underscoring the stability and predictability of our business model. Plus, with more than 90% of our projected revenue under long-term contracts with Tier 1 carriers, we continue to operate from a position of fundamental strength. We also remain focused on adding new global customers to our cloud platform, and while we have reached the contract negotiation phase with prospects, those opportunities did not contribute revenue in the quarter. Next, I would like to provide some context in our key customer relationships. At&T, we continue to see positive momentum and subscriber growth. AT&T has seen a meaningful lift in their value-added service revenue growth enabled by the streamlined digital onboarding processes that jointly we have put in place, which continue to drive improved take rates. We are still less than 2% penetrated within the total subscriber base of AT&T and growing ahead of our expectations, leaving a long runway for continued growth in 2026 and beyond. At Verizon, of their bundled cloud users, we continue to navigate the ongoing transition migrating to their MyPlan Perks portfolio. While this transition has created some near-term subscriber growth pressure, which has been slightly compounded by weakness in the carrier's overall subscriber growth, we believe Verizon's focus on positioning our cloud solution as a premium perk will ultimately strengthen the value proposition and drive more sustainable growth. As their customers migrate onto those individual PERC selections, further, we have several joint initiatives with Verizon that we believe will further accelerate growth, including expanded leverage of their direct and indirect retail channels, where we are seeing healthy uplifts in cloud take rates in both Q3 and early signs in Q4. We are also capitalizing on new SMB cloud perk to continue momentum with the SMB segment, and we are seeing promising subscriber adoption within the value segment, represented by brands such as Straight Talk, Total Wireless, and Simple Mobile. At SoftBank, we have kicked off the development work of our digital integration to their MySoftBank app through our software development kit. This will allow us to expand the discoverability across a broader base of SoftBank subscribers, which we expect to lead into increased adoption once fully implemented. We expect contribution from this digital channel expansion to begin next year. We are also below 2% penetration across SoftBank's mobile brands, with significant room for growth and expansion throughout 2026 and beyond. With Capsule, our own branded solution, we are seeing digital marketing initiatives with our carrier partner, Telkomsel, begin to generate tangible momentum. While this launch is still in small scale, we are encouraged by the focus and the results of their promotional efforts. We are also using the success story at Telkomsel to pitch Capsule to a variety of other deep pipeline opportunities with other carriers, and we are seeing meaningful progress in those conversations. It is still early, but we are pleased directionally and expect to see progress accelerate in 2026. On the new business front, we continue to make progress across all channels, including our current partner, Assurant, who has helped us expand our reach into new customers. We intend to continue to leverage this partnership for new customer launches in the fourth quarter and throughout 2026, while seeking additional channel partners which will expand our customer base. We are also making meaningful progress with several new potential customers moving to the contracting and onboarding phases in preparation for launches in 2026. Synchronoss continues to make and achieve significant milestones in our AI-driven transformation. We successfully developed complex features like end-to-end encryption for desktop clients using AI development automation and advanced AI capabilities by optimizing tuning large language models to generate user stories and test cases. Our teams leverage AI to enhance product features, improve security, and streamline development, including generating code that met stringent security and compliance standards with minimal refactoring. We also accelerated innovation through open-source AI model adoption, fine-tuned models for greater accuracy, and deployed hybrid retrieval augmented generation approaches to meet our customers' requirements. These advancements have enabled us to deliver secure, scalable solutions hosted on private networks, enhance our user engagement with AI-powered features, and lay the groundwork for continued growth in operational excellence. Additionally, we made a significant step forward with our core personal cloud platform by successfully completing and deploying a hybrid cloud AI model for advanced content intelligence, which also continues to focus on our cost optimization. By enabling in-house photo tagging and image embedding to be dynamically distributed across both company-owned and public cloud environments, this capability is a foundational pillar for next-generation features, including the new memories feature with integrated highlights and personalized genius-style content, reinforcing the commitment to driving monthly engaged users and delivering superior value to our service provider partners. Our enhanced platform capabilities, large global cloud subscriber base, and talented software development teams are creating a recipe to introduce capabilities and offerings to drive revenue and complement the expansion of our current cloud customer base. We believe these strategic initiatives will drive accelerated growth in the years ahead. Now, I would like to give some color around our guidance for the remainder of 2025. With anticipated continuation of subscriber headwinds among some customers in the fourth quarter and anticipated revenue contributions from new customer contracts, we are adjusting our full-year revenue guidance to be between $169 and $172 million. Due to this revision and expectations on the top line, we are also lowering our adjusted EBITDA guidance between $50 million and $53 million and free cash flow of between $6 and $10 million. These adjustments are a reflection of slightly lower expected revenue contributions and steady performance in operating expenses. Our recurring revenue is still expected to be at least 90% of total revenue, and our adjusted gross margin is expected to remain between 78-80%. Looking ahead, we see the softness in subscriber growth for the quarter as a temporary weakness, and we are building momentum across multiple fronts that we believe will drive improved performance in 2026. We are diligently working to drive accelerated growth through our core offering while exploring additional adjacencies to expand our total addressable market without losing sight of what makes Synchronoss unique. We are seeing the pace of development increase, and we internally develop new tools for AI initiatives across the technical side of our organization as well. Our strengthened balance sheet, operational discipline, and expanding customer relationships provide a solid foundation for growth. And while we recognize our results for the quarter were slightly below our expectations, we believe our healthy business model combined with our disciplined approach to cost management and expectations for new customer launches positions us to deliver improved growth performance in 2026 and the years to come. We remain confident in our strategy, our market position, and our ability to drive long-term value for shareholders. Now, I would like to turn it over to Lou for a detailed review of our financial performance. Lou? Louis W. Ferraro: Thank you, Jeff, and thank you, everyone, for joining us today. First, I will review our key financial metrics for 2025, which we believe serve as critical benchmarks for our performance, and then we will provide an update on our financial results and outlook. Starting with our key performance indicators, quarterly recurring revenue was 93.8% of total revenue, reflecting our stable cloud business model, which was driven by cloud subscriber growth of approximately 1%. Turning to our financial results for the third quarter ended September 30, 2025, total revenue was $42 million, down slightly from $43 million in the prior year period due to the delay of anticipated customer contracts and lower than expected subscriber growth at certain customers. Adjusted gross profit was $33.4 million or 79.5% of total revenue, compared to $34.2 million in the prior year, which amounted to 79.6% of revenue. The slight decline was due to lower revenue in the quarter. Income from operations was up 6.4% year over year from $5.5 million to $5.9 million, driven by further reductions in operating expenses. As a reminder, we paid down $25.4 million of our existing term loan at par last quarter from the proceeds of our CARES Act refund. Therefore, we do not foresee having to make another scheduled amortization payment prior to 2028. This should provide us with more free cash flow going to the bottom line over the next three years. Moving down the income statement, total operating expenses decreased 3.5% from $37.4 million to $36.1 million. Cost of revenues and sales, general and administrative costs were down year over year, while research and development and depreciation and amortization were up slightly. We are going to continue to be focused on disciplined cost control to support our profitability. As part of our cost reduction initiatives, we are seeking benefits and productivity and cost savings from AI deployment, including the optimization of multiple open-source models used in our products. We will continue to evaluate every avenue to mitigate additional costs, including deploying AI and machine learning both internally and externally as appropriate. Net income was $5.8 million or $0.51 per diluted share. This result was driven by a $5.2 million one-time interest income event from our tax refund, as well as non-cash foreign exchange that was slightly positive in the quarter. As a reminder, foreign exchange is a non-cash paper gain or loss that has no impact on the financial viability of the business, nor does it reflect on the fundamentals of our performance. Adjusted EBITDA was $12 million, representing a 28.5% margin consistent with our high-margin model and supported by cost control, including a 3.5% year-over-year reduction in operating expenses on a year-over-year basis, as we have mentioned previously. Moving to the balance sheet, cash and cash equivalents were $34.8 million as of September 30, 2025. This includes approximately $8.5 million in cash that was not used for the prepayment of debt from the tax refund, which we intend to use to fund new growth initiatives. The remainder of our proceeds from the tax refund were used to materially reduce our total debt balance, resulting in net debt of $139.8 million, which is approximately 2.7 times our anticipated 2025 adjusted EBITDA, a significant reduction from the year-ago period. As Jeff mentioned, this also reduced our annual interest payments by approximately $2.8 million at current interest rates. Free cash flow was $36 million, driven largely by the receipt of our tax refund in the quarter, and adjusted free cash flow was $4.2 million. Due to the factors mentioned today, we have adjusted our guidance to reflect the following for 2025: revenue of between $169 and $172 million, adjusted gross margin of between 78-80%, recurring revenue of at least 90% of total revenue, adjusted EBITDA of between $50 million and $53 million, and free cash flow of between $6 million and $10 million. The company's free cash flow guidance excludes proceeds of $33.9 million from the federal tax refund as previously communicated. As discussed last quarter, the guidance also excludes approximately $4.4 million of transaction fees from the 2025 term loan. These fees resulted from the company's recapitalization in which a $75 million term loan and a portion of the senior notes were considered modified under accounting principles when replaced with a new $200 million term loan due to participation by existing lenders. I will now turn the call back over to the operator for questions and answers. Thank you for joining us today. Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star and then one on the telephone keypad. You may press star and then 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary for you to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. The first question comes from Anja Soderstrom from Sidoti and Co. Please proceed with your questions. Anja Soderstrom: Hi, thank you for taking my questions. Well, I am just curious with the growth that you are seeing. Is that mainly then driven by higher wallet share rather than the subscriber growth, which seems to be a little bit challenged? And how should we then think about overall growth when the subscriber growth comes back if you are adding more value to the existing customers? Jeffrey George Miller: Yeah. And I will give that a start. Thank you very much for joining us. First off, we had a slight growth in our subscriber and subscription growth revenue category this quarter. One of the major contributors, as I mentioned, has been a little bit of a long sales cycle that we have experienced on getting new customer contracts. And, therefore, getting new customer growth to contribute to our overall results. We are seeing those conversations progress very well with new customer prospects. It is just taking some additional time to get through the contracts. On the subscriber side, we believe the initiatives that we have in place with our existing customers and the momentum that is already in existence with AT&T in particular will allow us to get back towards mid-single-digit types of subscriber growth, complemented by bringing in some new customers to try to help drive our growth for 2026 and beyond. Anja Soderstrom: Okay. Thank you. And you are talking about two rather important customers in the pipeline that you think are going to sign one by the end of the year and one early next year, it sounded like. But how does the rest of the pipeline look like? Jeffrey George Miller: Well, the pipeline, you should look at our business obviously, in two dimensions. Number one, continued growth with the subscribers that we or the customers we already serve. And as mentioned, with, for example, at&T, less than 2% penetration of subscriber growth today across their broad subscriber base. We have a lot of growth that will be driven through that. In addition to that, the pipeline for other customers both looks good for, I will call it, branded clouds, not unlike what we do today for AT&T, Verizon, and SoftBank. But also for our Capsule. And we have those opportunities in the United States, in Asia, in Europe, and even other parts of the world. So we are continuing to see a broad and very healthy pipeline of opportunities. And the guidance that we have given, as I mentioned, yes, we expect to have a new customer launch this year. An additional one launch in 2026. Anja Soderstrom: Okay. Thank you. And just one last for me. With the improved balance sheet and your positive cash flow, how should we think about capital allocation priorities? And are you considering potential share buybacks? Jeffrey George Miller: Yeah. Maybe I will ask Lou to address that question on behalf of the capital plan. Louis W. Ferraro: Sure. So the first thing that we are looking at is our ability for a change to be a little bit more on the offensive with our additional cash that we have from the tax refund. And that really before we get into stock buybacks, we look at that as a two-pronged potential opportunity for the company. Number one, is additional investment in our current products or expansion of our platform to serve our current and new customers with additional products, or potentially some inorganic growth opportunities that prior to this point we have not been able to take the advantage to look at and evaluate strategically. So that is really kind of where our capital allocation mindset is right now. Anja Soderstrom: Okay. Thank you. I will get back in the queue. Operator: Thank you. Ladies and gentlemen, just a reminder, if you would like to ask a question, please press star and then 1. If you would like to ask a question, please press. Our next question comes from Jon Robert Hickman from Needham and Co. Please proceed with your questions, Jon. Jon Robert Hickman: Hi. Can you elaborate a little bit on the two line items, the expense, the interest income, and the interest expense? Both of those were affected by your IRS payment. Is that what you said? Louis W. Ferraro: No. So our interest go ahead, Lou. Jeffrey George Miller: Go ahead. So our Jon, our interest income is a result of the interest that we received related to our federal tax refund. Okay. And our interest expense is related to the interest on the term loan and issuance costs related to it. Jon Robert Hickman: Okay. So okay. So going how much of that was, like, one-time? On the interest expense side? Louis W. Ferraro: $1.7 million. That was the deferred issuance cost as it relates to that line item. Jon Robert Hickman: 1.7. Okay. And then the interest from the so when you got the $39 million or whatever you had to part of that was just a refund, but part of it was the interest, and that is where the interest that was, like, earned interest that you had been Right. So if you look at if you look at the You had to take it all at once. Yeah. If you look at the $33.8 million, Jon, $28.6 million was the pure refund amount. That was the remaining balance of the $42 plus million that we had filed for under the CARES Act. And then we received $5.2 million going back retrospectively for all the years that were open under the investigation. So the total proceeds to the company $33.9 million. Inclusive of the interest. Jon Robert Hickman: Inclusive. Okay. So then so you said you had 1% subscriber growth year over year. What happened That is correct. Between Q2 and Q3? Jeffrey George Miller: Sequentially. Went from 3% subscriber growth, I believe, as we reported last quarter to 1% this quarter. Impacted by some of the things I had described. Yeah. Go ahead. Sorry. Well, was there a loss of subscribers? Louis W. Ferraro: Not just No. No. Year over year total subscriber growth on a on a we look at it year over year to be able to provide full visibility through gross ads, net ads, churn, and everything else. So we look at it on a year over year basis. Each quarter, we are growing. So we grew hundreds of thousands of subscribers in the quarter. But by virtue of our 11 plus million subscriber base, that represented 1% on a year over year basis. Jon Robert Hickman: Okay. So why so can you explain I mean, let us see. So revenues were actually down sequentially. Can you elaborate on that? Jeffrey George Miller: We had in the second quarter if you look at the line item detail, actually, the revenue makeup, our subscription growth actually grew, as I mentioned to Anja, slightly Q3 over Q2. But what we saw less of were one-time license or professional services fees. That is a reflection of the fact that we had for the license associated with the SDK deployment that we are doing. A contract with SoftBank that we closed in Q2. And while we saw some new business revenue in the third quarter, it was not as large as the second quarter performance. Jon Robert Hickman: Okay. Thank you. I appreciate that color. Jeffrey George Miller: Yeah. No problem. Thank you, Jon. Jon Robert Hickman: That is it for me. Operator: Thank you. There are no further questions at this time. I would like to turn the floor back over to Mr. Jeffrey George Miller. Thank you, sir. Jeffrey George Miller: Thank you. Once again, all of those who participate in the investment community, we thank you for continuing to take time invest your time and understanding and learning more about our business and the prospects for our future. To the Synchronoss team, once again, very strong performance by the team to help deliver tremendous advancements in our AI functionality to improve not only our product capability but also our operational efficiency. And for continuing to maintain very disciplined control that gives us the strong financial foundation upon which we have to grow the business in the future. So thanks to the Synchronoss team. I wish the rest of you a very good afternoon. Thank you for taking the time to join the call. Back to you, operator. Operator: Thanks, Jeff. Ryan Gardella: Before we conclude today's call, I would like to provide Synchronoss the safe harbor statement. That includes important cautions regarding forward-looking statements made during this call. During this call, management discussed certain factors that are likely to influence the company's business going forward. Any factors that are discussed today that are not historical, particularly comments regarding our prospects and market opportunities, are considered forward statements within the meaning of applicable securities laws. These forward-looking statements include comments about the company's plans and expectations about future performance. Forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially. All listeners are encouraged to review the company's SEC filings, including its most recent 10-Ks and 10-Q for a description of these risks. Statements made during this call are as of today, and the company does not have any obligation to update or revise any such forward-looking statements, whether as a result of new information, future events, or changes in expectations or otherwise. Please note that throughout today's call, management discussed certain non-GAAP financial measures such as adjusted EBITDA. Although the non-GAAP financial measures are derived from GAAP numbers, adjusted EBITDA is not necessarily cash generated by operations. This does not account for such items as deferred revenue or the capitalization of software development. Today's earnings release describes differences between the company's non-GAAP and GAAP reporting measures and presents a reconciliation for the periods reported in that release. Thank you for joining Synchronoss Technologies Third Quarter 2025 Earnings Call. You may now disconnect.
