Company Announces $10 million Cost Reduction
Plan
Synacor, Inc. (Nasdaq: SYNC), a leading provider of cloud-based
Collaboration and Identity Management software and services serving
global enterprises, video, internet and communications providers,
and governments, today announced its financial results for the
second quarter ended June 30, 2020.
Second Quarter Highlights
- Second quarter revenue of $18.2 million
- Second quarter GAAP net loss of $3.2 million and Adjusted
EBITDA of $0.5 million
- Software & Services segment revenue of $10.9 million, up
3%, and adjusted EBITDA margins expand to 34% from 26% in the prior
year
- Delivered double digit growth rates in Cloud ID and Zimbra
Enterprise SaaS, expected to sustain, offset by COVID-19 impact on
Advertising and consumer Email
- Company’s cost reduction plan expected to yield $10 million of
annual savings
“Our Software business grew 3% this quarter, driven by double
digit growth rates in Cloud ID and Zimbra Enterprise SaaS tempered
by lower revenue from maintenance and consumer Email as certain
customers proactively reduced costs during the COVID-19 pandemic,”
said Himesh Bhise, Synacor’s Chief Executive Officer. “We renewed
all Service Provider customer contracts that were up for renewal,
added four new Cloud ID customers, booked 197 new and growth Zimbra
customers, and expanded our sales pipeline.”
“In addition, we remain focused on driving profitability, and
are executing on a cost reduction plan that is expected to deliver
$10 million in annual savings without impacting our customer
commitments and growth initiatives,” Bhise added. “These actions
will significantly improve our EBITDA margins even at
COVID-19-impacted levels of revenue, and position us to generate
positive operating cash flow starting in Q4.”
Recent Highlights
- 197 new and expansion customers for Zimbra email and
collaboration platform delivered through worldwide channel
partners
- Signed three content streaming networks and one service
provider customer to Cloud ID.
- Active advertising publishers were 129 in Q2, up 34% from the
prior year quarter
- Renewed all Service Provider contracts that were up for renewal
in North America - seven Cloud ID contracts, six Zimbra contracts,
and five Portal contracts
- Unallocated corporate G&A declined 23% compared to the year
ago quarter as a result of our cost reduction actions
Financial Results:
Revenue
Revenue was $18.2 million, compared to reported revenue of $31.8
million, or $22.2 million when excluding the ATT.net portal
business, in the second quarter of 2019. The decline was primarily
driven by the COVID-19 impact on our advertising business
consistent with the industry-wide decline in media spend.
Revenue in our Software & Services segment totaled $10.9
million, compared with $10.6 million in the second quarter of 2019.
Revenue in our Portal & Advertising segment totaled $7.3
million, compared with reported revenue of $21.3 million, or $11.6
million net of the ATT.net portal business, in the prior year.
Net Loss
Net loss was $3.2 million, or $0.08 per share, compared with a
net loss of $2.5 million, or $0.06 per share, in the prior year.
The current year quarter includes $0.4 million of expenses for
legal and professional fees related to our since-terminated merger
with Qumu.
Adjusted EBITDA
Adjusted EBITDA was $0.5 million, or 2.5% of revenue, compared
with $1.6 million, or 5.1% of revenue, in the second quarter of
2019. Adjusted EBITDA excludes stock-based compensation, other
income and expense, asset impairments, restructuring costs, and
certain legal and professional fees. The decline was primarily
driven by the COVID-19 impact on advertising revenue and
margins.
Cash
The Company ended the quarter with $6.0 million in cash and cash
equivalents, compared with $8.9 million at the end of the first
quarter. The Company continues to have no borrowings on its credit
facility and had approximately $5.6 million of availability as of
quarter-end. With the cost reduction plan announced today and other
actions that the Company has already taken, management believes
that beginning with the fourth quarter, Synacor will be cash flow
positive on an on-going basis.
Guidance
Due to the continued uncertainty surrounding the duration and
pace of recovery from the COVID-19 pandemic, management has decided
to continue the suspension of quarterly guidance updates until
visibility improves.
Conference Call Details
Synacor will host a conference call today at 5 p.m. ET to
discuss its second quarter 2020 financial results. The live webcast
of the Company’s earnings conference call can be accessed at
https://www.synacor.com/investor-relations/events-and-presentations.
To participate, please dial 1-833-235-2655 (toll free) or
1-647-689-4151 (international) and reference conference ID
3077578.
Following the conclusion of the live call, a replay of the
webcast will be available on the Investor Relations section of the
Company's website for at least 90 days. A telephonic replay of the
conference call will also be available from 8 p.m. ET on August 11,
2020 until 11:59 p.m. ET on August 18, 2020 by dialing
1-800-585-8367 or 1-416-621-4642 and using the pin number
3077578.
About Synacor
Synacor (Nasdaq: SYNC) is a cloud-based software and services
company serving global 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.
We report adjusted net loss and adjusted diluted earnings per
share because we believe these measures provide investors with
additional information to assess our financial performance. These
measures should be viewed as supplemental data, rather than
substitutes or alternatives to the comparable GAAP measures. For a
reconciliation of our GAAP Condensed Consolidated Statements of
Operations to our adjusted non-GAAP measures, please refer to the
table “Reconciliation of Adjusted Financial 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, the statements and quotations from
management, statements regarding the impact of the Company’s cost
reduction plan on its future financial results, statements
regarding the ability to achieve positive operating cash flow in
future periods, 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: the impact of the COVID-19
pandemic on our business, execution of our plans and strategies;
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
the Company’s 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-K 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 August 11, 2020, and Synacor undertakes no duty to
update this information.
Synacor, Inc.
Condensed Consolidated Balance
Sheets
(In thousands)
(Unaudited)
June 30,
2020
December 31,
2019
Assets
Current assets:
Cash and cash equivalents
$
5,978
$
10,966
Accounts receivable, net
13,493
20,532
Prepaid expenses and other current
assets
3,977
2,989
Total current assets
23,448
34,487
Property and equipment, net
12,670
14,948
Operating lease right-of-use assets
4,187
4,765
Goodwill
15,940
15,948
Intangible assets
7,340
8,411
Other assets
933
1,319
Total Assets
$
64,518
$
79,878
Liabilities and Stockholders'
Equity
Current liabilities:
Accounts payable
$
10,472
$
12,583
Accrued expenses and other current
liabilities
3,413
5,878
Current portion of deferred revenue
5,349
6,509
Current portion of long-term debt and
finance leases
1,027
2,529
Current portion of operating lease
liabilities
2,179
2,165
Total current liabilities
22,440
29,664
Long-term portion debt and finance
leases
815
729
Deferred revenue
1,907
2,846
Long-term portion of operating lease
liabilities
2,151
2,366
Deferred income taxes
334
275
Other long-term liabilities
348
334
Total Liabilities
27,995
36,214
Stockholders' Equity:
Common stock
404
401
Treasury stock
(1,971
)
(1,931
)
Additional paid-in capital
147,233
146,460
Accumulated deficit
(108,454
)
(100,747
)
Accumulated other comprehensive loss
(689
)
(519
)
Total stockholders’ equity
36,523
43,664
Total Liabilities and Stockholders'
Equity
$
64,518
$
79,878
Synacor, Inc.
Condensed Consolidated Statement
of Operations
(In thousands except for share
and per share data)
(Unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2020
2019
2020
2019
Revenue
$
18,176
$
31,849
$
38,759
$
63,673
Costs and operating expenses:
Cost of revenue (1)
9,036
17,152
19,765
33,658
Technology and development (1)(2)
2,943
4,577
6,051
9,123
Sales and marketing (2)
3,803
5,550
8,171
11,541
General and administrative (1)(2)
3,274
3,955
7,740
8,420
Depreciation and amortization
2,225
2,567
4,439
5,002
Total costs and operating expenses
21,281
33,801
46,166
67,744
Loss from operations
(3,105
)
(1,952
)
(7,407
)
(4,071
)
Other income (expense), net
175
(207
)
342
9
Interest expense
(50
)
(55
)
(109
)
(119
)
Loss before income taxes
(2,980
)
(2,214
)
(7,174
)
(4,181
)
Provision for income taxes
202
273
533
550
Net loss
$
(3,182
)
$
(2,487
)
$
(7,707
)
$
(4,731
)
Net loss per share:
Basic
$
(0.08
)
$
(0.06
)
$
(0.19
)
$
(0.12
)
Diluted
$
(0.08
)
$
(0.06
)
$
(0.19
)
$
(0.12
)
Weighted average shares used to compute
net loss per share:
Basic
39,978,861
39,056,381
39,828,300
39,047,561
Diluted
39,978,861
39,056,381
39,828,300
39,047,561
Notes:
(1) Exclusive of depreciation and
amortization shown separately.
(2) Includes stock-based compensation as
follows:
Three Months Ended June
30,
Six Months Ended June
30,
2020
2019
2020
2019
Technology and development
$
56
$
92
$
113
$
195
Sales and marketing
103
111
204
226
General and administrative
224
121
443
234
$
383
$
324
$
760
$
655
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 June
30,
Six Months Ended June
30,
2020
2019
2020
2019
Reconciliation of Adjusted
EBITDA:
Net loss
$
(3,182
)
$
(2,487
)
$
(7,707
)
$
(4,731
)
Provision for income taxes
202
273
533
550
Interest expense
50
55
109
119
Other (income) expense, net
(175
)
207
(342
)
(9
)
Depreciation and amortization
2,765
2,986
5,497
5,473
Asset impairment
—
—
—
226
Stock-based compensation expense
383
324
760
655
Restructuring costs
60
—
120
—
Certain legal and professional services
fees
352
257
1,798
1,036
Adjusted EBITDA
$
455
$
1,615
$
768
$
3,319
*
"Certain legal and professional services
fees" includes legal fees and other related expenses outside the
ordinary course of business, as well as fees and expenses related
to merger and acquisition activities.
Synacor, Inc.
Condensed Consolidated Statements
of Cash Flows
(In thousands)
(Unaudited)
Six Months Ended June
30,
2020
2019
Cash Flows from Operating
Activities:
Net loss
$
(7,707
)
$
(4,731
)
Adjustments to reconcile net loss to net
cash and cash equivalents provided by (used in) operating
activities:
Depreciation and amortization
5,512
5,473
Asset impairment
—
226
Stock-based compensation expense
760
655
Provision for deferred income taxes
59
40
Change in allowance for doubtful
accounts
20
34
Changes in operating assets and
liabilities:
Accounts receivable, net
7,019
3,639
Prepaid expenses and other assets
(618
)
(23
)
Operating lease right-of-use assets and
liabilities, net
(102
)
36
Accounts payable, accrued expenses and
other liabilities
(4,170
)
(4,030
)
Deferred revenue
(1,619
)
193
Net cash (used in) provided by
operating activities
(846
)
1,512
Cash Flows from Investing
Activities:
Purchases of property and equipment
(1,972
)
(2,444
)
Net cash used in investing
activities
(1,972
)
(2,444
)
Cash Flows from Financing
Activities:
Repayments on long-term debt and finance
leases
(1,968
)
(1,585
)
Proceeds from exercise of common stock
options
—
40
Purchase of treasury stock and shares
received to satisfy minimum tax withholdings
(40
)
(6
)
Net cash used in financing
activities
(2,008
)
(1,551
)
Effect of exchange rate changes on cash
and cash equivalents
(162
)
(21
)
Net decrease in Cash and Cash
equivalents
(4,988
)
(2,504
)
Cash and cash equivalents, beginning of
period
10,966
15,921
Cash and cash equivalents, end of
period
$
5,978
$
13,417
Synacor, Inc.
Segment Results
(In thousands except for
percentages)
(Unaudited)
The Company has two reportable segments
which are determined on the basis of the products and services
provided to customers, identified as follows:
(i) Software & Services, which
includes email / collaboration (Zimbra) and identity management
(Cloud ID).
(ii) Portal & Advertising, which
includes managed portals and advertising solutions for
publishers.
The following table presents the key
segment financial measures for the periods indicated. Please refer
to the Reconciliation of GAAP to Non-GAAP Measures schedule for the
reconciliation of Adjusted EBITDA.
Three Months Ended June
30,
Six Months Ended June
30,
2020
2019
% Change
2020
2019
% Change
Segment Revenue:
Software & Services
$
10,915
$
10,588
3.1
%
$
21,977
$
21,746
1.1
%
Portal & Advertising
7,261
21,261
(65.8
)
%
16,782
41,927
(60.0
)
%
Total
$
18,176
$
31,849
(42.9
)
%
$
38,759
$
63,673
(39.1
)
%
Segment Adjusted EBITDA:
Software & Services
$
3,718
$
2,794
33.1
%
$
7,246
$
5,588
29.7
%
Portal & Advertising
(403
)
2,534
(115.9
)
%
(644
)
5,155
(112.5
)
%
Unallocated Corporate Expense
(2,860
)
(3,713
)
23.0
%
(5,834
)
(7,424
)
21.4
%
Total
$
455
$
1,615
(71.8
)
%
$
768
$
3,319
(76.9
)
%
Segment Adjusted EBITDA margin*
Software & Services
34.1
%
26.4
%
770 bps
33.0
%
25.7
%
730 bps
Portal & Advertising
(5.6
)
%
11.9
%
-1750 bps
(3.8
)
%
12.3
%
-1610 bps
Total
2.5
%
5.1
%
-260 bps
2.0
%
5.2
%
-320 bps
* Adjusted EBITDA as a percent of
revenue
The following tables presents a
disaggregation of segment revenue for the periods indicated based
upon the accounting definition of revenue recognition:
(i) Recurring = revenue recognized over
time
(ii) Non-recurring = revenue recognized at
a point in time
Synacor, Inc.
Segment Results
(In thousands except for
percentages)
(Unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2020
2019
% Change
2020
2019
% Change
Software & Services Revenue:
Recurring
$
8,063
$
8,388
(3.9
)
%
$
16,393
$
16,903
(3.0
)
%
Non-recurring
2,852
2,200
29.6
%
5,584
4,483
24.6
%
Discontinued Products **
—
—
—
%
—
360
(100.0
)
%
Total
$
10,915
$
10,588
3.1
%
$
21,977
$
21,746
1.1
%
Portal & Advertising Revenue:
Recurring
$
881
$
1,202
(26.7
)
%
$
2,105
$
2,708
(22.3
)
%
Non-recurring
6,380
20,059
(68.2
)
%
14,677
39,219
(62.6
)
%
Total
$
7,261
$
21,261
(65.8
)
%
$
16,782
$
41,927
(60.0
)
%
Total Revenue:
Recurring
$
8,944
$
9,590
(6.7
)
%
$
18,498
$
19,611
(5.7
)
%
Non-recurring
9,232
22,259
(58.5
)
%
20,261
43,702
(53.6
)
%
Discontinued Products **
—
—
—
%
—
360
—
%
Total
$
18,176
$
31,849
(42.9
)
%
$
38,759
$
63,673
(39.1
)
%
** VAM video product line which was
discontinued during Q1 2019.
Synacor, Inc.
Reconciliation of Adjusted
Financial Measures
(In thousands except per share
amounts)
(Unaudited)
Three months ended June 30,
2020
Per GAAP Statements
Asset Impairment
Restructuring Costs
Certain Legal &
Professional Fees
Adjusted Non-GAAP
Revenue
$
18,176
$
18,176
Costs and operating expenses:
Cost of revenue (1)
9,036
9,036
Technology and development (1)(2)
2,943
2,943
Sales and marketing (2)
3,803
3,803
General and administrative (1)(2)
3,274
(60
)
(352
)
2,862
Depreciation and amortization
2,225
2,225
Total costs and operating expenses
21,281
—
(60
)
(352
)
20,869
Loss from operations
(3,105
)
—
60
352
(2,693
)
Other income, net
175
175
Interest expense
(50
)
(50
)
Loss before income taxes
(2,980
)
—
60
352
(2,568
)
Provision for income taxes (3)
202
202
Net loss
$
(3,182
)
$
—
$
60
$
352
$
(2,770
)
Diluted EPS
$
(0.08
)
$
0.00
$
0.00
$
0.01
$
(0.07
)
Synacor, Inc.
Reconciliation of Adjusted
Financial Measures
(In thousands except per share
amounts)
(Unaudited)
Three months ended June 30,
2019
Per GAAP Statements
Asset Impairment
Restructuring Costs
Certain Legal &
Professional Fees
Adjusted Non-GAAP
Revenue
$
31,849
$
31,849
Costs and operating expenses:
Cost of revenue (1)
17,152
$
17,152
Technology and development (1)(2)
4,577
$
4,577
Sales and marketing (2)
5,550
$
5,550
General and administrative (1)(2)
3,955
(257
)
$
3,698
Depreciation and amortization
2,567
2,567
Total costs and operating expenses
33,801
—
—
(257
)
33,544
Loss from operations
(1,952
)
—
—
257
(1,695
)
Other expense, net
(207
)
(207
)
Interest expense
(55
)
(55
)
Loss before income taxes
(2,214
)
—
—
257
(1,957
)
Provision for income taxes (3)
273
273
Net loss
$
(2,487
)
$
—
$
—
$
257
$
(2,230
)
Diluted EPS
$
(0.06
)
$
—
$
0.00
$
0.01
$
(0.05
)
Notes:
(1) Exclusive of depreciation and
amortization shown separately.
(2) Includes stock-based compensation
(3) No income tax effects to adjustments
presented due to full valuation allowance.
Synacor's management believes that certain
non-GAAP measures of Adjusted Net Loss and Adjusted Diluted
Earnings per Share provide investors with additional information to
assess the Company's financial performance. These measures should
be viewed as supplemental data, rather than substitutes or
alternatives to the comparable GAAP measures.
Synacor, Inc.
Reconciliation of Adjusted
Financial Measures
(In thousands except per share
amounts)
(Unaudited)
Six months ended June 30,
2020
Per GAAP Statements
Asset Impairment
Restructuring Costs
Certain Legal &
Professional Fees
Adjusted Non-GAAP
Revenue
$
38,759
$
38,759
Costs and operating expenses:
Cost of revenue (1)
19,765
19,765
Technology and development (1)(2)
6,051
6,051
Sales and marketing (2)
8,171
8,171
General and administrative (1)(2)
7,740
—
(120
)
(1,798
)
5,822
Depreciation and amortization
4,439
4,439
Total costs and operating expenses
46,166
—
(120
)
(1,798
)
44,248
Loss from operations
(7,407
)
—
120
1,798
(5,489
)
Other income, net
342
342
Interest Expense
(109
)
(109
)
Loss before income taxes
(7,174
)
—
120
1,798
(5,256
)
Provision for income taxes (3)
533
533
Net loss
$
(7,707
)
$
—
$
120
$
1,798
$
(5,789
)
Diluted EPS
$
(0.19
)
$
—
$
—
$
0.05
$
(0.15
)
Synacor, Inc.
Reconciliation of Adjusted
Financial Measures
(In thousands except per share
amounts)
(Unaudited)
Six months ended June 30,
2019
Per GAAP Statements
Asset Impairment
Restructuring Costs
Certain Legal &
Professional Fees
Adjusted Non-GAAP
Revenue
$
63,673
$
63,673
Costs and operating expenses:
Cost of revenue (1)
33,658
33,658
Technology and development (1)(2)
9,123
9,123
Sales and marketing (2)
11,541
11,541
General and administrative (1)(2)
8,420
(226
)
(1,036
)
7,158
Depreciation and amortization
5,002
5,002
Total costs and operating expenses
67,744
(226
)
—
(1,036
)
66,482
Loss from operations
(4,071
)
226
—
1,036
(2,809
)
Other income, net
9
9
Interest Expense
(119
)
(119
)
Loss before income taxes
(4,181
)
226
—
1,036
(2,919
)
Provision for income taxes (3)
550
550
Net loss
$
(4,731
)
226
$
—
$
1,036
$
(3,469
)
Diluted EPS
$
(0.12
)
$
0.01
$
—
$
0.03
$
(0.09
)
Notes:
(1) Exclusive of depreciation and
amortization shown separately.
(2) Includes stock-based compensation
(3) No income tax effects to adjustments
presented due to full valuation allowance.
Synacor's management believes that certain
non-GAAP measures of Adjusted Net Loss and Adjusted Diluted
Earnings per Share provide investors with additional information to
assess the Company's financial performance. These measures should
be viewed as supplemental data, rather than substitutes or
alternatives to the comparable GAAP measures.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200811005794/en/
FNK IR Rob Fink +1.646.809.4048 rob@fnkir.com
Meredith Roth VP, Marketing & Corporate Communications
Synacor +1.770.846.1911 mroth@synacor.com
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