- Q3 revenue totaled $35.6 million,
recurring software revenue of $8.9 million grew 17% YoY
- Q3 net loss was $2.2 million, in line
with guidance; adjusted EBITDA improved to $2.7 million, exceeding
guidance range and up from $1.8 million a year ago
- Q3 wins include portal and Cloud ID
renewal with a major operator, new ShortsTV Network for Cloud ID
agreement, and 80 new Zimbra enterprise and government
customers
Synacor, Inc. (Nasdaq: SYNC), the trusted multiscreen technology
and monetization partner for video, internet and communications
providers, device manufacturers, governments and enterprises, today
announced its financial results for the third quarter ended
September 30, 2018.
“Our third-quarter financial results reflect our continued
attention to profitability and our focus on driving high-margin
recurring software revenue,” said Synacor CEO Himesh Bhise.
“Recurring software revenue from collaboration and identity
management platforms grew 17% from a year ago. Our adjusted EBITDA
for the quarter was $2.7 million, representing a 45% increase from
the prior-year quarter.
“We are being disciplined in steering away from low-margin,
publisher-based advertising revenue, even if it impacts our top
line, so that we can focus on growing recurring revenue and
improving profitability,” concluded Bhise.
Recent Highlights
- Extended portal and Cloud ID agreement
with a major U.S. operator
- Signed ShortsTV Network, a 24/7 channel
dedicated to short film, to Cloud ID TV Everywhere authentication
platform
- Signed 80 new Zimbra email business and
government agency customers worldwide
- Announced that Zimbra X, the first
distributed enterprise app on EOSIO, now leverages additional
blockchain capabilities such as smart contracts, EOS tokens and
verified identity APIs.
Q3 2018 Financial Results
Revenue: For the third quarter of 2018, revenue was $35.6
million, a decrease of 2% versus the third quarter of 2017.
Software revenue grew 20% while portal and advertising revenue was
down 11% primarily due to our increased focus on improving
profitability. Recurring software revenue was $8.9 million for the
quarter, and grew 17%.
Net Income: For the third quarter of 2018, net
loss was $2.2 million, or $(0.06) per share, compared with net
income of $0.3 million, or $0.01 per share, in the third quarter of
2017. Net income in the third quarter of 2017 included a $1.9
million gain on the sale of an investment.
Adjusted EBITDA: For the third quarter of 2018, adjusted
EBITDA, which excludes stock-based compensation, other income and
expense, restructuring costs and certain legal expenses, increased
45% to $2.7 million from $1.8 million in the third quarter of
2017.
Cash: The Company ended the third quarter of 2018 with
$15.7 million in cash and cash equivalents, compared with $15.0
million at the end of the second quarter of 2018.
Guidance
Based on information available as of November 8, 2018, the
Company is providing financial guidance for the fourth quarter of
2018. In addition, as a result of the Company’s refocusing of its
advertising business on higher-margin opportunities, including
proactively declining certain low-margin publisher-based
advertising inventory, it is revising full-year 2018 guidance. The
Company’s guidance for Q4 2018 and full-year 2018 are as
follows:
- Q4 2018 Guidance: Revenue for
the fourth quarter of 2018 is projected to be in the range of $35.5
million to $38.5 million. The Company expects to report net income
of $0.5 million to a net loss of $1.0 million and adjusted EBITDA
of $2.6 million to $4.1 million, which excludes stock-based
compensation expense of approximately $0.5 million, restructuring
costs of approximately $0.1 million, certain legal expenses of
approximately $0.3 million, depreciation and amortization of
approximately $2.4 million, and tax, interest expense and other
income and expense of approximately $0.3 million.
- Fiscal 2018 Guidance: Revenue
for the full year of 2018 is expected to be in the range of $140
million to $143 million. The Company expects to report a net loss
in the range of $6.7 million to $8.2 million and adjusted EBITDA in
the range of $7.0 million to $8.5 million, which excludes
stock-based compensation expense of approximately $2.0 million,
restructuring costs of approximately $1.1 million, certain legal
expenses of approximately $1.3 million, depreciation and
amortization of approximately $9.7 million, and tax, interest
expense, and other income and expense of approximately $1.1
million.
Conference Call Details
Synacor will host a conference call today at 5:00 p.m. ET to
discuss the third-quarter 2018 financial results and 2018 financial
guidance with the investment community. The live webcast of
Synacor’s earnings conference call can be accessed at
http://investor.synacor.com/events.cfm. To participate, please
login approximately 10 minutes prior to the webcast. For those
without access to the internet, the call may be accessed toll-free
via phone at (833) 235-2655, with conference ID 2284716, or callers
outside the U.S. may dial (647) 689-4151. Following completion of
the call, a recorded webcast replay will be available on Synacor's
website. To listen to the telephone replay through November 15,
2018, call toll-free (800) 585-8367, or callers outside the U.S.
may dial (416) 621-4642. The conference ID is 2284716.
About Synacor
Synacor (Nasdaq: SYNC) is the trusted technology development,
multiplatform services and revenue partner for video, internet and
communications providers, device manufacturers, governments and
enterprises. Synacor’s mission is to enable its customers to better
engage with their consumers. Its customers use Synacor’s technology
platforms and services to scale their businesses and extend their
subscriber relationships. Synacor delivers managed portals,
advertising solutions, email and collaboration platforms, and
cloud-based identity management. www.synacor.com
Non-GAAP Financial Measures
The Company uses certain non-GAAP financial measures in this
release. Generally, a non-GAAP financial measure is a numerical
measure of a company's performance, financial position or cash
flows that either excludes or includes amounts that are not
normally excluded or included in the most directly comparable
measure calculated and presented in accordance with generally
accepted accounting principles (GAAP).
We report adjusted EBITDA because it is a key measure used by
our management and Board of Directors to understand and evaluate
our core operating performance and trends, to prepare and approve
our annual budget and to develop short- and long-term operational
plans. In particular, the exclusion of certain expenses in
calculating adjusted EBITDA can provide a useful measure for
period-to-period comparisons of our core business. Accordingly, we
believe that adjusted EBITDA provides useful information to
investors and others in understanding and evaluating our operating
results in the same manner as our management and Board of
Directors.
For a reconciliation of adjusted EBITDA to net loss, the most
directly comparable financial measure calculated and presented in
accordance with GAAP, please refer to the table “Reconciliation of
GAAP to Non-GAAP Measures” in this press release.
Safe Harbor Statement Under the Private Securities Litigation
Reform Act of 1995
"Safe Harbor" statement under the Private Securities Litigation
Reform Act of 1995: This press release contains forward-looking
statements concerning Synacor's expected financial performance
including, without limitation, its fourth-quarter and fiscal year
2018 guidance, the statements and quotations from management and
Synacor's strategic and operational plans. The achievement or
success of the matters covered by such forward-looking statements
involves risks, uncertainties and assumptions. If any such risks or
uncertainties materialize or if any of the assumptions prove
incorrect, the Company's results could differ materially from the
results expressed or implied by the forward-looking statements the
Company makes.
The risks and uncertainties referred to above include - but are
not limited to - risks associated with: execution of our plans and
strategies, including execution against our agreement with
AT&T; the pace and degree to which the AT&T portal can be
monetized; the loss of a significant customer, including by
non-renewal of its contract; our ability to obtain new customers;
our ability to integrate the assets and personnel from
acquisitions; expectations regarding consumer taste and user
adoption of applications and solutions; developments in internet
browser software and search advertising technologies; general
economic conditions; expectations regarding our ability to timely
expand the breadth of services and products or introduction of
new services and products; consolidation within the cable and
telecommunications industries; changes in the competitive dynamics
in the market for online search and digital advertising; the
risk that security measures could be breached and unauthorized
access to subscriber data could be obtained; potential third party
intellectual property infringement claims or other legal claims
against Synacor; and the price volatility of our common stock.
Further information on these and other factors that could affect
the Company’s financial results is included in filings it makes
with the Securities and Exchange Commission from time to time,
including the section entitled "Risk Factors" in the Company's most
recent Form 10-Q filed with the SEC. These documents are available
on the SEC Filings section of the Investor Information section of
the Company's website at http://investor.synacor.com/. All
information provided in this release and in the attachments is
available as of November 8, 2018, and Synacor undertakes no duty to
update this information.
Synacor, Inc.
Condensed Consolidated Balance Sheets (In thousands)
(Unaudited) September 30, December 31,
2018 2017 Assets Current assets: Cash and cash
equivalents $ 15,685 $ 22,476 Accounts receivable, net 21,180
31,696 Prepaid expenses and other current assets 5,131
4,516 Total current assets 41,996 58,688
Property and equipment, net 19,748 20,505 Goodwill 15,950 15,955
Intangible assets 11,088 12,695 Other long-term assets 598
937
Total Assets $ 89,380
$ 108,780 Liabilities and
Stockholders' Equity Current liabilities: Accounts payable $
17,220 $ 25,931 Accrued expenses and other current liabilities
6,589 7,075 Current portion of deferred revenue 7,481 11,605
Current portion of capital lease obligations 2,376
2,444 Total current liabilities 33,666 47,055
Long-term portion of capital lease obligations 1,668 3,371 Deferred
revenue 2,594 3,682 Deferred income taxes 85 264 Other long-term
liabilities 151 63
Total
Liabilities 38,164 54,435
Stockholders' Equity: Common stock 393 396 Treasury
stock (1,893 ) (1,881 ) Additional paid-in capital 144,334 142,486
Accumulated deficit (91,348 ) (86,627 ) Accumulated other
comprehensive loss (270 ) (29 ) Total stockholders’
equity 51,216 54,345
Total
Liabilities and Stockholders' Equity $ 89,380
$ 108,780
Synacor, Inc. Condensed
Consolidated Statements of Operations (In thousands except
share and per share amounts) (Unaudited) Three
months ended Nine months ended September 30,
September 30, 2018 2017 2018
2017 Revenue $ 35,643 $ 36,269 $ 104,481 $ 94,025
Costs and operating expenses: Cost of revenue (1) 18,186 17,620
51,659 44,644 Technology and development (1)(2) 6,017 6,748 18,773
20,950 Sales and marketing (2) 5,667 6,179 18,507 19,025 General
and administrative (1)(2) 5,279 4,495 14,616 12,820 Depreciation
and amortization 2,437 2,596
7,316 7,004 Total costs and operating expenses
37,586 37,638 110,871
104,443 Loss from operations (1,943 ) (1,369 )
(6,390 ) (10,418 ) Gain on sale of investment — 1,902 — 1,902 Other
(expense) income (32 ) 99 (46 ) 172 Interest expense (80 )
(127 ) (265 ) (328 ) (Loss) income before
income taxes (2,055 ) 505 (6,701 ) (8,672 ) Income tax provision
165 244 478 999
Net (loss) income $ (2,220 ) $ 261 $ (7,179 ) $
(9,671 ) Net (loss) income per share: Basic $ (0.06 )
$ 0.01 $ (0.18 ) $ (0.27 ) Diluted $ (0.06 ) $ 0.01 $
(0.18 ) $ (0.27 ) Weighted average shares used to compute
net (loss) income per share: Basic 38,951,558
38,471,377 38,856,836 35,590,563
Diluted 38,951,558 39,940,790
38,856,836 35,590,563 Notes: (1)
Exclusive of depreciation shown separately. (2) Includes
stock-based compensation as follows:
Three months ended
Nine months ended September 30, September 30,
2018 2017 2018 2017 Technology and
development $ 101 $ 190 $ 369 $ 604 Sales and marketing 110 142 374
500 General and administrative 150 273
708 824 $ 361 $ 605 $
1,451 $ 1,928
Synacor,
Inc. Condensed Consolidated Statements of Cash Flows
(In thousands) (Unaudited) Nine months
ended September 30, 2018 2017 Cash
Flows from Operating Activities: Net loss $ (7,179 ) $ (9,671 )
Adjustments to reconcile net loss to net cash provided (used in) by
operating activities: Depreciation and amortization 7,316 7,004
Capitalized software impairment — 256 Stock-based compensation
expense 1,451 1,928 Gain on sale of investment — (1,902 ) Provision
for deferred income taxes (179 ) 197 Change in allowance for
doubtful accounts 118 — Increase in estimated value of contingent
consideration — 107 Change in operating assets and liabilities net
of effect of acquisition: Accounts receivable, net 10,398 6,933
Prepaid expenses and other assets (291 ) (1,646 ) Accounts payable
(8,284 ) (1,668 ) Accrued expenses and other liabilities (398 )
(2,369 ) Deferred revenue (2,756 ) (2,080 )
Net
cash provided (used in) by operating activities
196 (2,911 ) Cash Flows from
Investing Activities: Proceeds from sale of investment — 2,645
Purchases of property and equipment (5,271 ) (5,774 )
Net cash used in investing activities (5,271
) (3,129 ) Cash Flows from Financing
Activities: Net proceeds from offering of common stock — 20,046
Repayments of long-term debt — (5,000 ) Repayments on capital lease
obligations (1,811 ) (914 ) Proceeds from exercise of common stock
options 341 1,942 Purchase of treasury stock and shares received to
satisfy minimum tax withholding liabilities (12 ) (117 ) Deferred
acquisition payment — (1,300 )
Net cash
(used in) provided by financing activities (1,482
) 14,657 Effect of exchange rate
changes on cash and cash equivalents (234 ) —
Net (decrease) increase in Cash and Cash Equivalents (6,791 ) 8,617
Cash and Cash Equivalents at beginning of period 22,476
14,315 Cash and Cash Equivalents at end of
period
$ 15,685 $ 22,932
Synacor,
Inc. Reconciliation of GAAP to Non-GAAP Measures (In
thousands) (Unaudited) The following table
presents a reconciliation of net loss to adjusted EBITDA for each
of the periods indicated:
Three months ended Nine
months ended September 30, September 30,
2018 2017 2018 2017
Reconciliation of Adjusted EBITDA: Net (loss) income $
(2,220 ) $ 261 $ (7,179 ) $ (9,671 ) Income tax provision 165 244
478 999 Interest expense 80 127 265 328 Gain on sale of investment
— (1,902 ) — (1,902 ) Other income (expense) 32 (99 ) 46 (172 )
Depreciation and amortization 2,437 2,596 7,316 7,004 Capitalized
software impairment — — — 256 Stock-based compensation expense 361
605 1,451 1,928 Restructuring costs 766 — 1,034 — Certain legal
expenses* 1,033 — 1,033
—
Adjusted EBITDA $ 2,654
$ 1,832 $ 4,444 $
(1,230 )
* "Certain legal expenses" include legal fees and other related
expenses associated with legal proceedings outside the ordinary
course of our business, including the class action securities
litigation, and arbitration costs related to the dissolution of a
former joint venture.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20181108005936/en/
Sharon Merrill AssociatesDavid Calusdian,
617-542-5300ir@synacor.com
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