Synchronoss Technologies, Inc.

Good day and thank you for standing by. Welcome to the Synchronous Technology second quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Ryan Gardella, Investor Relations. Please go ahead.

Thank you. Good afternoon and welcome to the Synchronous Technologies second quarter 2024 earnings conference call. Joining us today from the company are President and CEO Jeff Miller and CFO Lou Ferraro. By now, everyone should have access to the company's second quarter 2024 earnings press release issued this afternoon, which is available on the Investor Relations section of our website. Today's call will begin with remarks from Jeff and Lou, after which we will host a question and answer session. Before we conclude, I'll provide the necessary cautions regarding the forward-looking statements made by management during this call. I would like to remind everyone again that this call is being recorded and it will be made available for replay via link in the investor relations section of the company's website. Now, I'll turn it over to Jeff Miller, President and CEO of Synchronous.

Jeff? Thank you, Ryan. Welcome, everyone, and thank you for joining today's call. In the second quarter, we continued to execute on our strategic transformation to a global cloud solutions provider. And we are pleased to announce strong results, including continued subscriber growth, acceleration in year-over-year revenue growth, and as we demonstrated in Q1, continued strong adjusted EBITDA and cash flow results. We made additional progress on several fronts to strengthen our business operationally and financially. highlighted in Q2 by the successful repurchase of all of our outstanding preferred stock and some of our senior notes at a discounted price, which significantly improves our capital structure, increases our operational flexibility, and remove costs from our business, including a material reduction in our cost of capital. Both Lou and I will make comments about this shortly. As we look ahead, we see a number of opportunities to drive additional improvements that we can enhance our growth profile, improve our profitability, free cash flow conversion, and strengthen our balance sheet. On today's call, I'll cover three topics. First, I'll review some of the key highlights from the quarter. Then, provide some context on how far the business has come over the last year. And finally, lay out at a high level how we're thinking about the business moving forward. So let me start with a quick review of our second quarter results. We generated revenue of 43.5 million, up 5.9% year-over-year, driven primarily by 6.1% year-over-year cloud subscriber growth. We produced gross margins, adjusted gross margins, of 77.5% versus 73.2% in the prior year period, an improvement that was driven largely by our sale of non-core assets and diligent cost control within the business. That income was $78,000, up $11 million year over year. And the adjusted EBITDA was $13 million, up 115% year over year. This represents a 29.9% EBITDA margin, double the adjusted EBITDA margin from the year-ago period. The value we provide our customers is visible. tangible and material, generating high profit growth and revenue for our partners while strengthening the end user's relationship with the carrier through a more engaged experience. Over 75% of our revenues are under contract for at least four years, and we continue to see subscriber growth and adoption. We expect the depth of our personal cloud solution to build even more loyalty and stickiness among our blue chip clientele. resulting in further improvements in our profitability and free cash flow conversion. For example, during the quarter, Verizon announced unlimited cloud storage offerings as part of their recently launched ultimate phone upgrade program. Further, Verizon introduced a new My Home set of solutions as part of their home broadband offerings, again with unlimited cloud as a key element of that solution. This marks another significant milestone in how our customers are integrating our cloud platform into their latest consumer offers, such as Verizon's Perks, to provide seamless and secure cloud storage for mobile and broadband subscribers. Verizon's offers demonstrate how we enable storied brands to build another connection point to customers and subscribers at a consumer price point that represents a compelling industry-leading value for unlimited personal digital storage. We also strengthened our global leadership team as we announced the appointment of Junji Nishihara as the new country manager for our Japanese operations. Japan has been a long-standing market of focus for us, and with the deployment late last year of the personal cloud platform to powered SoftBank's ancient data box service, it has become even more important to our business. We believe that Japan represents a significant growth opportunity for us, and we will continue to invest in expanding our presence and customer relationships there. Next, I want to provide some context on just how far the business has come recently and where we think it can go from here. Most recently, in June of this year, we announced a major step forward in our financial position by repurchasing all of the outstanding preferred stock and some of our senior debt at a discount with a new $75 million term loan. This was an opportunistic refinancing, that resulted in a much more streamlined capital structure, more operational flexibility, and importantly, save synchronous money, which can now flow through to our bottom line. Just to reiterate, a big part of the new investment story for synchronous is our ability to generate cash. Further, over the past two years, we divested our non-core digital experience, messaging, and network X businesses. And these divestitures were strategically important for a number of different angles. One, they allowed us to focus our significantly higher margin core cloud business whose growth outpaced the non-core businesses. And as a result, Synchronous has been able to return to revenue and EBITDA growth, improve profitability, including positive net income since these divestitures. Two, these moves set the stage for a rapidly streamlined our organizations. by removing more than $15 million in annualized costs from the go-forward cloud business. And three, it allowed the company to take the first step towards improving our capital structure by taking down approximately $10 million of our preferred stock immediately following the transaction last year. Taken together, this was a key inflection point for our business, where we were able to put a stake in the ground and inform the investment community that we plan to deliver 5% to 8% revenue growth, adjusted gross margins greater than 75%, and adjusted EBIT margins surpassing 25% this year, 2024. Additionally, I wanted to briefly provide an update on the litigation matters between the SEC and two of our former employees. During the quarter, this matter was settled, concluding our future obligations to fund related legal defense. So collectively, these actions put us in a better position for success in our core business, provide a simpler and more compelling investment opportunity for potential shareholders, and present multiple opportunities for shareholder value creation going forward. In the past few years, and in particular this last 12 months, we have cleared several major hurdles and delivered results consistent with a high margin, cash flow positive, rule of 30 SaaS company. Our recent refinancing was yet another step in this path, and the long-term strategic decisions that we have made are playing out as we intended. And we are confident in our ability to execute our playbook going forward. With that, I'd like to turn the call over to Lou.