Synchronoss’ fourth quarter and year-end financial results for 2014 exceeded the high end of the company’s expectations for both the top and bottom line, according to Stephen Waldis, founder, chairman and CEO.
As Waldis told analysts during a conference call last week to discuss the company’s earnings, “Our Personal Cloud business outpaced growth expectations all year long, and our Activation Services businesses accelerated in the second half of 2014.”
The Bridgewater-based company reported net GAAP revenues of $130.2 million, representing an increase of 34 percent, compared with the fourth quarter of 2013. Gross profit was $77.6 million and income from operations was $20.5 million in the fourth quarter of 2014. Net income was $13.6 million, leading to diluted earnings per share of $0.30, compared with $0.39 for the fourth quarter of 2013.
Synchronoss said that much of its success was due to the ongoing personal cloud business it had cultivated over the past few years. The company offers personal cloud infrastructure to mobile operators around the world, who then provide the cloud to their own customers.
The company stated that in recent weeks it had expanded its contract with Verizon Wireless. “This expanded commitment is part of our existing five-year deal, and contemplates continued growth in both adoption and engagement of the Verizon Cloud, as well as new programs and services that will be part of the Personal Cloud and the support of a wide range of new devices that will be launched in the future,” Waldis said during the conference call.
The company also announced a major acquisition of the cloud assets from F-Secure (Helsinki, Finland) to give Synchronoss a greater share of the worldwide personal cloud market. Synchronoss will pay approximately $60 million in cash to acquire those assets from F-Secure. The deal is expected to close by the end of the first quarter of fiscal 2015.
Commenting on the acquisition, Waldis said, “Upon completion of the transaction and combined with our current customers, Synchronoss will now serve 75% of the global worldwide market; Synchronoss will also have nine of the leading Tier 1 mobile operators as customers around the world; and an addressable customer base that includes 75 mobile operators, or operators.”
The F-Secure acquisition will also shore up Synchronoss’ personal cloud position with AT&T. Another aspect of the agreement will let Sychronoss integrate F-Secure’s security into its personal cloud offering. “We believe mobile operators and subscribers would enjoy a secure and safe personal cloud with all their important content that is backed up and stored in the cloud,” Waldis said during the call.
He added that Synchronoss would be incorporating F-Secure assets into the company’s standard personal cloud offering. This will involve integrating some F-Secure software capabilities, virtualizing the company’s global data-center infrastructure and migrating F-Secure customers onto the Synchronoss platform.
Integrated cloud offering will provide a service “that’s easier for subscribers to adopt,” Waldis said, but will also lower Synchronoss’ cost structure.
“This is similar to a process we took with our NewBay acquisition … when we demonstrated that taking the time to integrate the technology and customers onto a single platform significantly improves adoption rates over time.”
(The conference call transcript was provided by Seeking Alpha.)