Synchronoss Technologies Management Discusses Q2 2012 Results - Earnings Call Transcript

Synchronoss Technologies (SNCR)

Q2 2012 Earnings Call

August 01, 2012 4:30 pm ET

Executives

Lawrence R. Irving - Chief Financial Officer, Executive Vice President and Treasurer

Stephen G. Waldis - Founder, Executive Chairman, Chief Executive Officer, Member of Key Employee Stock Options Committee and Member of Business Development Committee

Analysts

Tom Roderick - Stifel, Nicolaus & Co., Inc., Research Division

Julio C. Quinteros - Goldman Sachs Group Inc., Research Division

Thomas Ernst - Deutsche Bank AG, Research Division

Shyam Patil - Raymond James & Associates, Inc., Research Division

Lauren Choi

Scott P. Sutherland - Wedbush Securities Inc., Research Division

Daniel H. Ives - FBR Capital Markets & Co., Research Division

William V. Power - Robert W. Baird & Co. Incorporated, Research Division

Gregory Burns - Sidoti & Company, LLC

Gray Powell - Wells Fargo Securities, LLC, Research Division

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Second Quarter 2012 Synchronoss Technologies Earnings Conference Call. My name is Derrick, and I will be your operator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn it over to Synchronoss's Chief Financial Officer, Mr. Larry Irving. Please proceed.

Lawrence R. Irving

Thank you. Good afternoon, and welcome to the Synchronoss second quarter 2012 earnings call. We will be discussing the results announced in the press release issued after the market closed today. Again, I am Larry Irving, Chief Financial Officer of Synchronoss. With me on the call is Steve Waldis, Founder and CEO.

During the call, we will make statements related to our business that may be considered forward-looking statements under federal securities laws. These statements reflect our views only as of today and should not be reflected upon as representing our views as of any subsequent date. These statements reflect our current views regarding the future and are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations.

For a discussion of the material risk and other important factors that could affect our actual results, please refer to those listed in our SEC filings, including our most recently filed annual report on Form 10-K and quarterly report on Form 10-Q.

With that, I will turn the call over to Steve, and I'll come back a bit later to provide some further details regarding our financials and our forward-looking outlook. Steve?

Stephen G. Waldis

Thank you, Larry. Good afternoon, and thanks for joining us on our call today to review our second quarter financial results, which were in the upper half or above the high-end of our guidance.

Our non-GAAP revenues were $67.2 million above the midpoint of our guidance and representing 22% growth on a year-over-year basis. From a profitability perspective, our non-GAAP operating margin of approximately 26% led to a non-GAAP EPS of $0.29, which is above the high-end of our guidance.

Now in addition to today's strong financial results, there are 5 key themes that I want to focus my remarks on today. The first is that there are multiple industry trends that are making it clear that consumers will increasingly look to carriers for cloud-based content management solutions that can and will coexist with those of major device and operating system vendors, and Synchronoss is becoming entrenched as a key enabler of those carrier cloud strategies.

Second, another major expansion of our Verizon relationship this quarter further validates our belief that carriers will be making, and are making, significant investments to their cloud strategies.

Third, we've spent a considerable amount of time with investors this past quarter addressing the status of our AT&T business. And I'm pleased to share that the combination of our progress on existing initiatives are very early advancement into cloud-based services at AT&T, and ongoing dialogue relative to future projects all speak to the strength of our AT&T relationship and long-term growth potential.

Fourth, pleased to announce a major win at Telefonica, where we are beginning our deployment of cloud-based content management solutions in their home market of Spain.

And finally, our work and efforts with Vodafone in Germany has led to expanding our activation platform to support additional business units and markets at Vodafone.

Now in recent years, we've invested heavily to deliver the industry's first cloud-based platform, to deliver these content manages services for carriers and to stake out a leadership position on a global scale in front of the growing demand of powerful industry drivers such as mobile, social and cloud. Evidence that our strategy is working has never been more clear than our announcements today.

As we look to the future, we expect to continue to be strong adoption and proliferation of vertical cloud offerings from the device providers themselves and those operating system vendors where their subscribers can perform and access services over the air such as synchronization, backup and restore, uploading and downloading of videos, pictures and other user-generated content. But the key thing to keep in mind is that all these services are confined within a homogeneous and operating environment and are tightly tied to each OEM's operating system.

However, consumers will look for choices in a strong need for an independent cloud service that is interoperable across OS platforms, whether it be iOS, Android, Symbian, RIM, J2ME and devices such as smartphones and tablets and emerging connected devices such as smart TVs, cameras and home automation systems.

Now the iCloud has been tremendous for the overall industry in raising awareness and comfort levels associated with the consumer use of the cloud. And the iPhone and iPad are widely successful product offerings that we benefit to from as well. However, Android currently has the #1 market share in mobile and Windows 8 may become yet another viable competitor. And at the pace of innovation and proliferation of mobile devices, it is not going to slow any time soon. The bottom line is that we're in a heterogeneous world, and the carriers will have a strong play to provide a broad range of cloud services that are connected across the device providers and OS platforms that run on their networks.

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