SYNCHRONOSS TECHNOLOGIES INC - Quarter Report: 2022 September (Form 10-Q)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-40574

SYNCHRONOSS TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)


Delaware			06-1594540
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

200 Crossing Boulevard, 3rd Floor Bridgewater, New Jersey			08807
(Address of principal executive offices)			(Zip Code)

(866) 620-3940

(Registrant’s telephone number, including area code)

(Former name, former address, and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer

☐

Accelerated filer

Non-accelerated filer

☐

Smaller Reporting Company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $.0001 par value	SNCR	The Nasdaq Stock Market, LLC
8.375% Senior Notes due 2026	SNCRL	The Nasdaq Stock Market, LLC

As of November 07, 2022, there were 90,866,207 shares of common stock issued and outstanding.

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SYNCHRONOSS TECHNOLOGIES, INC.

FORM 10-Q INDEX


		Page No.
PART I.	FINANCIAL INFORMATION	3

Item 1.	Condensed Consolidated Financial Statements and Notes	3

	Condensed Consolidated Balance Sheets (unaudited)	3

	Condensed Consolidated Statements of Operations (unaudited)	4

	Condensed Consolidated Statements of Comprehensive (Loss) Income (unaudited)	5

	Condensed Consolidated Statements of Stockholders’ Equity (unaudited)	6

	Condensed Consolidated Statements of Cash Flows (unaudited)	8

	Notes to Condensed Consolidated Financial Statements (unaudited)	9


Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38

Item 4.	Controls and Procedures	39


PART II.	OTHER INFORMATION	40

Item 1.	Legal Proceedings	40

Item 1A.	Risk Factors	40

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	44

Item 3.	Defaults Upon Senior Securities	44

Item 4.	Mine Safety Disclosures	45

Item 5.	Other Information	45

Item 6.	Exhibits	46

SIGNATURES		47

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PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND NOTES

SYNCHRONOSS TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands)


	September 30, 2022		December 31, 2021

ASSETS
Current assets:
Cash and cash equivalents	$	22,584	$	31,504


Accounts receivable, net	45,903		47,586
Prepaid & other current assets	43,890		42,901


Total current assets	112,377		121,991
Non-current assets:

Property and equipment, net	4,556		6,979
Operating lease right-of-use assets	21,471		26,399
Goodwill	203,261		224,577
Intangible assets, net	47,586		60,335
Loan receivable	4,834		4,834

Other assets, non-current	4,804		5,619



Total non-current assets	286,512		328,743
Total assets	$	398,889	$	450,734
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	8,902	$	11,097
Accrued expenses	58,165		61,916
Deferred revenues, current	14,600		22,368




Total current liabilities	81,667		95,381



Long-term debt, net of debt issuance costs	134,200		133,104
Deferred tax liabilities	578		560
Deferred revenues, non-current	402		548

Leases, non-current	30,725		36,095
Other non-current liabilities	4,904		9,218

Total liabilities	252,476		274,906
Commitments and contingencies:

Series B Non-Convertible Perpetual Preferred Stock, $0.0001 par value; 150 shares authorized, 71 and 75 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively	68,348		72,505
Redeemable noncontrolling interest	12,500		12,500
Stockholders’ equity:
Common stock, $0.0001 par value; 150,000 shares authorized, 91,192 and 88,305 issued and outstanding at September 30, 2022 and December 31, 2021, respectively	9		9

Additional paid-in capital	490,072		492,512
Accumulated other comprehensive loss	(61,517)		(32,985)
Accumulated deficit	(362,999)		(368,713)
Total stockholders’ equity	65,565		90,823
Total liabilities and stockholders’ equity	$	398,889	$	450,734

See accompanying notes to condensed consolidated financial statements.

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SYNCHRONOSS TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share data)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021


Net revenues	$	59,896	$	69,753	$	190,998	$	206,784
Costs and expenses:
Cost of revenues1	22,440		27,245		69,595		83,024
Research and development	12,911		15,368		42,162		49,962
Selling, general and administrative	15,338		27,953		48,523		67,790
Restructuring charges	201		1,485		1,905		3,075
Depreciation and amortization	7,726		8,215		24,019		26,567
Total costs and expenses	58,616		80,266		186,204		230,418
Income (loss) from operations	1,280		(10,513)		4,794		(23,634)
Interest income	20		24		230		54
Interest expense	(3,463)		(2,933)		(10,131)		(3,172)
(Loss) gain on divestiture	(73)		—		2,549		—
Other income (expense), net	4,437		(1,669)		10,206		(3,489)

Income (loss) from operations, before taxes	2,201		(15,091)		7,648		(30,241)
(Provision) benefit for income taxes	(1,115)		6,982		(1,678)		7,346


Net income (loss)	1,086		(8,109)		5,970		(22,895)
Net (loss) income attributable to redeemable noncontrolling interests	(66)		—		(256)		286
Preferred stock dividend	(2,298)		(1,722)		(7,255)		(33,728)
Net loss attributable to Synchronoss	$	(1,278)	$	(9,831)	$	(1,541)	$	(56,337)



Earnings (loss) per share:



Basic	$	(0.01)	$	(0.11)	$	(0.02)	$	(0.98)



Diluted	$	(0.01)	$	(0.11)	$	(0.02)	$	(0.98)
Weighted-average common shares outstanding:
Basic	86,400		85,646		86,156		57,662
Diluted	86,400		85,646		86,156		57,662

________________________________

1 Cost of revenues excludes depreciation and amortization which are shown separately.

See accompanying notes to condensed consolidated financial statements.

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SYNCHRONOSS TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(Unaudited) (In thousands)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Net income (loss)	$	1,086	$	(8,109)	$	5,970	$	(22,895)
Other comprehensive loss, net of tax:
Foreign currency translation adjustments	(13,331)		(1,827)		(28,647)		(3,595)

Net income on inter-company foreign currency transactions	35		358		115		897
Total other comprehensive loss	(13,296)		(1,469)		(28,532)		(2,698)
Comprehensive loss	(12,210)		(9,578)		(22,562)		(25,593)
Comprehensive (loss) income attributable to redeemable noncontrolling interests	(66)		—		(256)		286
Comprehensive loss attributable to Synchronoss	$	(12,276)	$	(9,578)	$	(22,818)	$	(25,307)

See accompanying notes to condensed consolidated financial statements.

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SYNCHRONOSS TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited) (In thousands)


	Three Months Ended September 30, 2022
	Common Stock			Treasury Stock			Additional		Accumulated Other				Total
	Shares	Amount		Shares	Amount		Paid-In Capital		Comprehensive Income (Loss)		Accumulated deficit		Stockholders' Equity
Balance at June 30, 2022	89,045	$	9	—	$	—	$	490,594	$	(48,221)	$	(364,019)	$	78,363
Stock based compensation	—	—		—	—		1,710		—		—		1,710
Issuance of restricted stock	2,147	—		—	—		—		—		—		—

Preferred stock dividend	—	—		—	—		(2,298)		—		—		(2,298)










Net income attributable to Synchronoss	—	—		—	—		—		—		1,086		1,086
Non-controlling interest	—	—		—	—		66		—		(66)		—
Total other comprehensive loss	—	—		—	—		—		(13,296)		—		(13,296)







Balance at September 30, 2022	91,192	$	9	—	$	—	$	490,072	$	(61,517)	$	(362,999)	$	65,565


	Three Months Ended September 30, 2021
	Common Stock			Treasury Stock			Additional		Accumulated Other				Total
	Shares	Amount		Shares	Amount		Paid-In Capital		Comprehensive Income (Loss)		Accumulated deficit		Stockholders' Equity
Balance at June 30, 2021	88,121	$	9	—	$	—	$	491,660	$	(29,442)	$	(360,271)	$	101,956
Stock based compensation	—	—		—	—		2,438		—		—		2,438
Issuance of restricted stock	(122)	—		—	—		—		—		—		—

Preferred stock dividends accrued	—	—		—	—		(1,722)		—		—		(1,722)










Net loss attributable to Synchronoss	—	—		—	—		—		—		(8,109)		(8,109)
Non-controlling interest	—	—		—	—		—		—		—		—
Total other comprehensive loss	—	—		—	—		—		(1,469)		—		(1,469)







Balance at September 30, 2021	87,999	$	9	—	$	—	$	492,376	$	(30,911)	$	(368,380)	$	93,094

See accompanying notes to condensed consolidated financial statements.


	Nine Months Ended September 30, 2022
	Common Stock			Treasury Stock			Additional		Accumulated Other				Total
	Shares	Amount		Shares	Amount		Paid-In Capital		Comprehensive Income (Loss)		Accumulated deficit		Stockholders' Equity
Balance at December 31, 2021	88,305	$	9	—	$	—	$	492,512	$	(32,985)	$	(368,713)	$	90,823
Stock based compensation	—	—		—	—		4,639		—		—		4,639
Issuance of restricted stock	2,954	—		—	—		—		—		—		—

Preferred stock dividend	—	—		—	—		(7,112)		—		—		(7,112)
Amortization of preferred stock issuance costs	—	—		—	—		(143)		—		—		(143)





Shares withheld for taxes in connection with issuance of restricted stock	(67)	—		—	—		(80)		—		—		(80)



Net income attributable to Synchronoss	—	—		—	—		—		—		5,970		5,970
Non-controlling interest	—	—		—	—		256		—		(256)		—
Total other comprehensive loss	—	—		—	—		—		(28,532)		—		(28,532)







Balance at September 30, 2022	91,192	$	9	—	$	—	$	490,072	$	(61,517)	$	(362,999)	$	65,565

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	Nine Months Ended September 30, 2021
	Common Stock			Treasury Stock			Additional		Accumulated Other				Total
	Shares	Amount		Shares	Amount		Paid-In Capital		Comprehensive Income (Loss)		Accumulated deficit		Stockholders' Equity
Balance at December 31, 2020	51,177	$	5	(7,162)	$	(82,087)	$	499,348	$	(28,213)	$	(345,771)	$	43,282
Stock based compensation	—	—		—	—		7,472		—		—		7,472
Issuance of restricted stock	1,676	—		—	—		1		—		—		1

Preferred stock dividends accrued	—	—		—	—		(20,937)		—		—		(20,937)
Amortization of preferred stock issuance costs	—	—		—	—		(12,791)		—		—		(12,791)


Issuance of common stock related to acquisition	42,308	4		—	—		109,996		—		—		110,000
Common Stock - Issuance Costs	—	—		—	—		(8,340)		—		—		(8,340)
Retirement of treasury stock	(7,162)	—		7,162	82,087		(82,087)		—		—		—




Net loss attributable to Synchronoss	—	—		—	—		—		—		(22,895)		(22,895)
Non-controlling interest	—	—		—	—		(286)		—		286		—
Total other comprehensive loss	—	—		—	—		—		(2,698)		—		(2,698)








Balance at September 30, 2021	87,999	$	9	—	$	—	$	492,376	$	(30,911)	$	(368,380)	$	93,094

See accompanying notes to condensed consolidated financial statements.

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SYNCHRONOSS TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited) (In thousands)


	Nine Months Ended September 30,
	2022		2021
Operating activities:
Net income (loss)	$	5,970	$	(22,895)




Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization	24,019		26,567



Amortization of debt issuance costs	1,030		305






Loss on disposals of fixed assets	1		58

Gain on sale of DXP & Activations Solutions	(2,549)		—
Gain on disposals of intangible assets	—		(550)
Amortization of bond discount (premium)	66		—

Deferred income taxes	(56)		(1,574)

Stock-based compensation	4,692		7,230


Operating lease impairment, net	175		1,794
Changes in operating assets and liabilities:
Accounts receivable, net	401		8,905
Prepaid expenses and other current assets	2,684		(7,275)
Accounts payable	(1,319)		(6,441)
Accrued expenses	(164)		8,237


Deferred revenues	(6,839)		(13,338)
Other liabilities	(17,033)		4,528

Net cash provided by operating activities	11,078		5,551

Investing activities:
Purchases of fixed assets	(1,021)		(1,386)
Additions to capitalized software	(15,250)		(17,004)


Proceeds from the sale of intangibles	—		550
Proceeds from the sale of DXP & Activations Solutions	8,000		—







Net cash used in investing activities	(8,271)		(17,840)

Financing activities:
Share-based compensation-related proceeds, net of taxes paid on withholding shares	—		(1)
Taxes paid on withholding shares	(80)		(1)



Debt issuance costs related to long term debt	—		(7,811)


Proceeds from issuance of long term debt	—		125,000



Repayment of revolving line of credit	—		(10,000)

Proceeds from issuance of common stock	—		110,000
Common stock issuance costs	—		(8,340)

Proceeds from issuance of Series B preferred stock	—		75,000
Series B preferred stock issuance costs	—		(2,495)
Series B preferred dividend paid in the form of cash	(4,157)		—
Redemption of Series B Preferred stock	(6,738)		—
Redemption of Series A Preferred stock	—		(278,665)

Net cash (used in) provided by financing activities	(10,975)		2,687

Effect of exchange rate changes on cash	(752)		72

Net decrease in cash and cash equivalents	(8,920)		(9,530)
Cash and cash equivalents, beginning of period	31,504		33,671
Cash and cash equivalents, end of period	$	22,584	$	24,141










Supplemental disclosures of non-cash investing and financing activities:
Paid in kind dividends on Series A Preferred Stock	$	—	$	31,277
Paid in kind dividends on Series B Preferred Stock	$	2,581	$	—

See accompanying notes to condensed consolidated financial statements.

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SYNCHRONOSS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED

(Amounts in tables in thousands, except for per share data or unless otherwise noted)

1. Description of Business

General

Synchronoss Technologies, Inc. (“Synchronoss” or the “Company”) is a leading provider of white label cloud, messaging, and digital solutions that enable our customers to keep subscribers, systems, networks and content in sync.

The Synchronoss Personal Cloud™ platform is a secure and highly scalable white label platform designed to store and sync subscriber’s personally created content seamlessly to and from current and new devices. This allows a carrier’s customers to protect, engage with and manage their personal content and gives the Company’s Operator customers the ability to increase average revenue per user (“ARPU”) through a new monthly recurring charge (“MRC”) and opportunities to mine valuable data that will give subscribers access to new, beneficial services.

The Synchronoss Personal Cloud™ platform is specifically designed to support smartphones, tablets and wirelessly enabled consumer electronics such as wearables for health and wellness, cameras, tablets, e-readers, personal navigation devices, and GPS enabled devices, as well as connected automobiles and homes.

The Synchronoss Messaging Platform powers mobile messaging and mailboxes for hundreds of millions of telecommunication subscribers. The Advanced Messaging platform is a powerful, secure, intelligent, white-label messaging platform that expands capabilities for communications service provider and multi-service providers to offer P2P messaging via Rich Communications Services (“RCS”). The Mobile Messaging Platform (“MMP”) provides a single standard ecosystem for onboarding and management to brands, advertisers and message wholesalers.

The Synchronoss Digital Portfolio includes the Total Network Management application which provides operators with the tools and software to design their physical network, streamline their infrastructure purchases, and manage and optimize comprehensive network expense for leading top tier carriers around the globe.

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SYNCHRONOSS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED

(Amounts in tables in thousands, except for per share data or unless otherwise noted)

2. Basis of Presentation and Consolidation

Basis of Presentation and Consolidation

The accompanying interim unaudited condensed consolidated financial statements have been prepared by Synchronoss and in the opinion of management, include all adjustments necessary for a fair presentation of the Company’s financial position, results of operations and cash flows for the interim periods. They do not include all of the information and footnotes required by U.S. generally accepted accounting principles (“GAAP”) for complete financial statements and should be read in conjunction with the Company’s audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. The results of operations for the three and nine months ended September 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022.

The condensed consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries and variable interest entities (“VIE”) in which the Company is the primary beneficiary and entities in which the Company has a controlling interest. Investments in less than majority-owned companies in which the Company does not have a controlling interest, but does have significant influence, are accounted for as equity method investments. Investments in less than majority-owned companies in which the Company does not have the ability to exert significant influence over the operating and financial policies of the investee are accounted for using the cost method. All material intercompany transactions and accounts are eliminated in consolidation.

For further information about the Company’s basis of presentation and consolidation or its significant accounting policies, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

Risks and Uncertainties

There continue to be uncertainties regarding the coronavirus ("COVID-19") pandemic and current geopolitical environment. The Company is closely monitoring the impact of the pandemic and geopolitical environment on all aspects of its business, including how it will impact its customers, employees, suppliers, vendors, business partners and distribution channels. While the pandemic or geopolitical environment did not materially affect the Company’s financial results and business operations for the three and nine months ended September 30, 2022, the Company is unable to predict the impact these factors will have on its financial position and operating results due to numerous uncertainties. The Company will continue to assess the evolving impact of the COVID-19 pandemic and geopolitical environment and will make adjustments to its operations as necessary.

Recently Issued Accounting Standards

Recent accounting pronouncements adopted

Standard

Description

Effect on the financial statements

ASU 2021-04 Earnings Per Share (Topic 260), Debt— Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40)

The amendments in this Update provide guidance for a modification or an exchange of a freestanding equity-classified written call option that is not within the scope of another Topic.

We adopted this standard on January 1, 2022. The Company evaluated these changes and concluded that they did not have any material impact on the Company’s consolidated financial position or results of operations upon adoption.

Date of adoption: January 1, 2022.

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SYNCHRONOSS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED

(Amounts in tables in thousands, except for per share data or unless otherwise noted)

ASU 2021-05 Leases (Topic 842). Lessors—Certain Leases with Variable Lease Payments

The amendments in this Update affect lessors with lease contracts that (1) have variable lease payments that do not depend on a reference index or a rate and (2) would have resulted in the recognition of a selling loss at lease commencement if classified as sales-type or direct financing. FASB amends lessor classification guidance to prevent selling losses on leases with variable payments.

Date of adoption: January 1, 2022.

ASU 2021-08 Business Combinations (Topic 805). Accounting for Contract Assets and Contract Liabilities
from Contracts with Customers

The amendments in this Update primarily address the accounting for contract assets and contract liabilities from revenue contracts with customers in a business combination. However, the amendments also apply to contract assets and contract liabilities from other contracts to which the provisions of Topic 606 apply, such as contract liabilities from the sale of nonfinancial assets within the scope of Subtopic 610-20, Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets.

Date of adoption: January 1, 2022.

Standards issued not yet adopted

ASU 2022-04 Liabilities - Supplier Finance Programs
(Subtopic 405-50). Disclosure of Supplier Finance Program Obligations

The amendments in this Update apply to all entities that use supplier finance programs in connection with the purchase of goods and services (herein described as buyer parties). Supplier finance programs, which also may be referred to as reverse factoring,
payables finance, or structured payables arrangements, allow a buyer to offer its suppliers the option for access to payment in advance of an invoice due date, which is paid by a third-party finance provider or intermediary on the basis of invoices that the buyer has confirmed as valid.
The amendments in this Update require that a buyer in a supplier finance program disclose sufficient information about the program to allow a user of financial statements to understand the program’s nature, activity during the period, changes from period to period, and potential magnitude. To achieve that objective, the buyer should disclose qualitative and quantitative information about its supplier finance programs.

The Company continues to evaluate these changes and does not anticipate any material impact on the Company’s consolidated financial position or results of operations upon adoption.

Planned date of adoption: January 1, 2023.

Digital Experience Platform and Activation Solutions Sale

On March 7, 2022, Synchronoss Technologies, Inc. and iQmetrix Global Ltd. (“iQmetrix ”), entered into an Asset Purchase Agreement, pursuant to which Synchronoss has agreed to sell its Digital Experience Platform and activation solutions (the “DXP Business”) to iQmetrix for up to a total purchase price of $14 million. The purchase price is payable as follows: (i) $7.5 million on the closing date of the Transaction, (ii) $0.5 million deposited into an escrow account on the Closing Date, (iii) $1 million paid twelve (12) months from the Closing Date, and (iv) $5 million that may be payable as an earn-out.

This transaction closed on May 11, 2022. The Company received the $7.5 million cash payment on the transaction close date. The Company received the $0.5 million payment in escrow during the third quarter in accordance with the terms of the

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SYNCHRONOSS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED

(Amounts in tables in thousands, except for per share data or unless otherwise noted)

Asset Purchase Agreement. The remaining $1 million escrow payment was recorded into other current assets. This consideration is not contingent on any further actions.

The Company determined the fair value of the earn-out provision was $3.6 million of which $3.0 million was recorded as an other current asset and the remaining portion was recorded as non-current other asset.

The book value of the divested intangible assets associated with the DXP Business was $2.3 million. For the goodwill allocation, the fair value of the core reporting unit was estimated using a combination of the income approach, which incorporates the use of the discounted cash flow method, and the market approach, which incorporates the use of earnings and revenue multiples based on market data. Based on the fair value of the core reporting unit and the aggregate consideration received in the transaction, the Company determined the attributable fair value of goodwill to the DXP Business was $7.6 million. The transaction resulted in a $2.5 million gain for the nine months ended September 30, 2022.

Accounts Receivable Securitization Facility

On June 23, 2022 (the “Closing Date”), the Company and certain of its subsidiaries (together with the Company, the “Company Group”) entered into a $15 million accounts receivable securitization facility (the “A/R Facility”) with Norddeutsche Landesbank Girozentrale.

The A/R Facility transaction includes (i) Receivables Purchase Agreements (the “Receivables Purchase Agreements”) dated as of the Closing Date, among the Company, as initial servicer, SN Technologies, LLC, a wholly owned special purpose subsidiary of the Company (“SN Technologies”), as seller, Norddeutsche Landesbank Girozentrale, as administrative agent (the “Administrative Agent”), and the purchasers party thereto, the group agents party thereto and the originators party thereto; (ii) Purchase and Sale Agreements (the “Purchase and Sale Agreements”) dated as of the Closing Date, between the Company Group, as originators (the “Originators”), and SN Technologies, as purchaser; (iii) the Administration Agreement (the “Administration Agreement”) dated as of the Closing Date, between the Company, as servicer, and Finacity Corporation, as administrator; and (iv) the Performance Guaranty (the “Performance Guaranty”) dated as of the Closing Date made by the Company in favor of the Administrative Agent.

Pursuant to the Purchase and Sale Agreements, the Originators will sell existing and future accounts receivable [and related assets] (the “Receivables”) to SN Technologies in exchange for cash and/or subordinated notes. The Originators and SN Technologies intend the transactions contemplated by the Purchase and Sale Agreements to be true sales to SN Technologies by the respective Originators. Pursuant to the Receivables Purchase Agreement, SN Technologies will in turn grant an undivided security interest to the Administrative Agent in the Receivables in exchange for a credit facility permitting borrowings of up to $15 million outstanding from time to time. Yield is payable to the Administrative Agent under the Receivables Purchase Agreements at a variable rate based on the Norddeutsche Landesbank Girozentrale’s Hanover funding rate plus a 2.35% margin. The Company pays a commitment fee shall equal 0.85% per annum on the average daily unused outstanding capital. Pursuant to the Performance Guaranty, the Company guarantees the performance of the Originators of their obligations under the Purchase and Sale Agreements.

The Company has not agreed to guarantee any obligations of SN Technologies or the collection of any of the receivables and will not be responsible for any obligations to the extent the failure to perform such obligations by the Company or any Originators results from receivables being uncollectible on account of the insolvency, bankruptcy or lack of creditworthiness or other financial inability to pay of the related obligor.

Unless earlier terminated or subsequently extended pursuant to the terms of the Receivables Purchase Agreement, the A/R Facility will expire on June 23, 2025.

The foregoing description of the A/R Facility and the respective transactions contemplated thereby does not purport to be complete and is qualified in its entirety by reference to the full text of the Receivables Purchase Agreements, Purchase and Sale Agreements, Administration Agreement and Performance Guaranty, copies of which are filed as Exhibits 10.1, 10.2, 10.3 and 10.4, respectively, on Form 8-K filed with Securities and Exchange Commission on June 23, 2022.

The Company has not drawn on the A/R Facility as of September 30, 2022.

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(Amounts in tables in thousands, except for per share data or unless otherwise noted)

3. Revenue

Disaggregation of revenue

The Company disaggregates revenue from contracts with customers into the nature of the products and services and geographical regions. The Company’s geographic regions are the Americas, Europe, the Middle East and Africa (“EMEA”), and Asia Pacific (“APAC”). The majority of the Company’s revenue is from the TMT sector.


	Three Months Ended September 30, 2022								Three Months Ended September 30, 2021
	Cloud		Digital		Messaging		Total		Cloud		Digital		Messaging		Total
Geography:
Americas	$	36,811	$	8,868	$	1,907	$	47,586	$	41,090	$	12,486	$	2,426	$	56,002
APAC	114		767		7,479		8,360		245		1,123		6,929		8,297
EMEA	1,633		—		2,317		3,950		1,789		756		2,909		5,454
Total	$	38,558	$	9,635	$	11,703	$	59,896	$	43,124	$	14,365	$	12,264	$	69,753

Service Line:
Professional Services	$	3,192	$	626	$	2,334	$	6,152	$	3,542	$	1,983	$	3,709	$	9,234
Transaction Services	161		1,655		—		1,816		1,237		1,113		2		2,352
Subscription Services	35,205		5,456		7,684		48,345		38,345		9,456		7,830		55,631
License	—		1,898		1,685		3,583		—		1,813		723		2,536
Total	$	38,558	$	9,635	$	11,703	$	59,896	$	43,124	$	14,365	$	12,264	$	69,753


	Nine Months Ended September 30, 2022								Nine Months Ended September 30, 2021
	Cloud		Digital		Messaging		Total		Cloud		Digital		Messaging		Total
Geography:
Americas	$	118,369	$	28,308	$	6,908	$	153,585	$	115,192	$	34,329	$	17,207	$	166,728
APAC	177		2,433		20,640		23,250		245		3,166		19,878		23,289
EMEA	4,990		1,495		7,678		14,163		5,474		1,978		9,315		16,767
Total	$	123,536	$	32,236	$	35,226	$	190,998	$	120,911	$	39,473	$	46,400	$	206,784

Service Line:
Professional Services	$	9,780	$	3,642	$	8,117	$	21,539	$	11,351	$	6,212	$	8,907	$	26,470
Transaction Services	707		4,404		56		5,167		4,533		4,326		5		8,864
Subscription Services	113,049		20,104		24,236		157,389		105,027		26,435		36,365		167,827
License	—		4,086		2,817		6,903		—		2,500		1,123		3,623
Total	$	123,536	$	32,236	$	35,226	$	190,998	$	120,911	$	39,473	$	46,400	$	206,784

Trade Accounts Receivable and Contract balances

The Company classifies its right to consideration in exchange for deliverables as either a receivable or a contract asset. A receivable is a right to consideration that is unconditional (i.e. only the passage of time is required before payment is due). For example, the Company recognizes a receivable for revenues related to its time and materials and transaction or volume-based contracts. The Company presents such receivables in Trade accounts receivable, net in its Condensed Consolidated Statements of Financial Position at their net estimated realizable value. The Company maintains an allowance for credit losses to provide

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for the estimated amount of receivables that may not be collected. The allowance is based upon an assessment of customer creditworthiness, historical payment experience, the age of outstanding receivables and other economic indicators.

A contract asset is a right to consideration that is conditional upon factors other than the passage of time. For example, the Company would record a contract asset if it records revenue on a professional services engagement but are not entitled to bill until the Company achieves specified milestones. Contract assets balance at September 30, 2022 is $15.0 million.

Amounts collected in advance of services being provided are accounted for as contract liabilities, which are presented as deferred revenue on the accompanying Condensed Consolidated Balance Sheets and are realized with the associated revenue recognized under the contract. Nearly all of the Company's contract liabilities balance is related to services revenue, primarily subscription services contracts.

The Company’s contract assets and liabilities are reported in a net position on a customer basis at the end of each reporting period.

Significant changes in the contract liabilities balance (current and non-current) during the period are as follows:


	Contract Liabilities1
Balance - January 1, 2022	$	22,916
Revenue recognized in the period	(188,243)
Amounts billed but not recognized as revenue	180,329


Balance - September 30, 2022	$	15,002

________________________________

1 Comprised of Deferred Revenue

Transaction price allocated to the remaining performance obligations

Topic 606 requires that the Company disclose the aggregate amount of transaction price that is allocated to performance obligations that have not yet been satisfied as of September 30, 2022. The Company has elected not to disclose transaction price allocated to remaining performance obligations for:

1.Contracts with an original duration of one year or less, including contracts that can be terminated for convenience without a substantive penalty;

2.Contracts for which the Company recognizes revenues based on the right to invoice for services performed;

3.Variable consideration allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied promise to transfer a distinct good or service that forms part of a single performance obligation in accordance with Topic 606 Section 10-25-14(b), for which the criteria in Topic 606 Section 10-32-40 have been met. This applies to a limited number of situations where the Company is dependent upon data from a third party or where fees are highly variable.

Many of the Company’s performance obligations meet one or more of these exemptions. Specifically, the Company has excluded the following from the Company’s remaining performance obligations, all of which will be resolved in the period in which amounts are known:

•consideration for future transactions, above any contractual minimums

•consideration for success-based transactions contingent on third party data

•credits for failure to meet future service level requirements

As of September 30, 2022, the aggregate amount of transaction price allocated to remaining performance obligations, other than those meeting the exclusion criteria above, was $136.0 million, of which approximately 93.2 percent is expected to be recognized as revenues within 2 years, and the remainder thereafter.

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(Amounts in tables in thousands, except for per share data or unless otherwise noted)

Estimates of revenue expected to be recognized in future periods also exclude unexercised customer options to purchase services that do not represent material rights to the customer. Customer options that do not represent a material right are only accounted for in accordance with Topic 606 when the customer exercises its option to purchase additional goods or services.

4. Fair Value Measurements

In accordance with accounting principles generally accepted in the United States, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three-level hierarchy prioritizes the inputs used to measure fair value as follows:

•Level 1 - Observable inputs - quoted prices in active markets for identical assets and liabilities;

•Level 2 - Observable inputs other than the quoted prices in active markets for identical assets and liabilities includes quoted prices for similar instruments, quoted prices for identical or similar instruments in inactive markets, and amounts derived from valuation models where all significant inputs are observable in active markets; and

•Level 3 - Unobservable inputs - includes amounts derived from valuation models where one or more significant inputs are unobservable and require the Company to develop relevant assumptions.

The following is a summary of assets, liabilities and redeemable noncontrolling interests and their related classifications under the fair value hierarchy:


	September 30, 2022
	Total		(Level 1)		(Level 2)		(Level 3)
Assets
Cash and cash equivalents	$	22,584	$	22,584	$	—	$	—


Total assets	$	22,584	$	22,584	$	—	$	—



Temporary equity
Redeemable noncontrolling interests1	$	12,500	$	—	$	—	$	12,500
Total temporary equity	$	12,500	$	—	$	—	$	12,500


	December 31, 2021
	Total		(Level 1)		(Level 2)		(Level 3)
Assets
Cash and cash equivalents	$	31,504	$	31,504	$	—	$	—


Total assets	$	31,504	$	31,504	$	—	$	—



Temporary Equity
Redeemable noncontrolling interests1	$	12,500	$	—	$	—	$	12,500
Total temporary equity	$	12,500	$	—	$	—	$	12,500

________________________________

1 Put arrangements held by the noncontrolling interests in certain of the Company’s joint venture.

Redeemable Noncontrolling Interests

The redeemable noncontrolling interests recorded at fair value are put arrangements held by the noncontrolling interests in certain of the Company’s joint ventures. The Company recognizes changes in the redemption value immediately as they occur and adjusts the carrying value of the noncontrolling interest to the greater of the estimated redemption value, which approximates fair value, at the end of each reporting period or the initial carrying amount.

The fair value of the redeemable noncontrolling interests was estimated by applying an income approach using a discounted cash flow analysis. This fair value measurement is based on significant inputs that are not observable in the market and thus represents a Level 3 measurement. Significant changes in the underlying assumptions used to value the redeemable

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noncontrolling interests could significantly increase or decrease the fair value estimates recorded in the Condensed Consolidated Balance Sheets.

The changes in fair value of the Company’s Level 3 redeemable noncontrolling interests during the nine months ended September 30, 2022 were as follows:


	Redeemable noncontrolling interests
Balance at December 31, 2021	$	12,500
Fair value adjustment	(256)
Net loss attributable to redeemable noncontrolling interests	256
Balance at September 30, 2022	$	12,500

5. Leases

The Company has entered into contracts with third parties to lease a variety of assets, including certain real estate, equipment, automobiles and other assets. The Company’s leases frequently allow for lease payments that could vary based on factors such as inflation or the degree of utilization of the underlying asset. For example, certain of the Company’s real estate leases could require us to make payments that vary based on common area maintenance charges, insurance and other charges. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The Company is party to certain sublease arrangements, primarily related to the Company’s real estate leases, where it acts as the lessee and intermediate lessor.

The Company reflects finance leases as a component of Leases, non-current on the Condensed Consolidated Balance Sheet. The finance leases were not material for the period ended September 30, 2022.

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The following table presents information about the Company's Right of Use (ROU) assets and lease liabilities at September 30, 2022:



ROU assets:
Non-current operating lease ROU assets	$	21,471



Operating lease liabilities:
Current operating lease liabilities1	$	5,682
Non-current operating lease liabilities	30,280
Total operating lease liabilities	$	35,962

________________________________

1 Amounts are included in Accrued Expenses on the Condensed Consolidated Balance Sheet.

The following table presents information about lease expense and sublease income for the three and nine months ended September 30, 2022:


	Three Months Ended September 30, 2022		Nine Months Ended September 30, 2022
Operating lease cost1	$	1,677	$	5,691
Other lease costs and income:
Variable lease costs1	193		1,364
Operating lease impairments1	—		175
Sublease income1	(684)		(2,058)

Total net lease cost	$	1,186	$	5,172

________________________________

1 Amounts are included in Cost of revenues, Selling, general and administrative and/or Research and development based on the function that the underlying leased asset supports which are reflected in the Condensed Consolidated Statements of Operations.

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The following table provides the undiscounted amount of future cash flows included in our lease liabilities at September 30, 2022 for each of the five years subsequent to December 31, 2021 and thereafter, as well as a reconciliation of such undiscounted cash flows to our lease liabilities at September 30, 2022:


Year	Operating Leases
2022	$	2,346
2023	7,915
2024	8,052
2025	7,909
2026	7,759
Thereafter	10,386
Total future lease payments	44,367
Less: amount representing interest	(8,405)
Present value of future lease payments (lease liability)	$	35,962

The following table provides the weighted-average remaining lease term and weighted-average discount rates for our leases as of September 30, 2022:


Operating Leases:
Weighted-average remaining lease term (years), weighted based on lease liability balances			5.50
Weighted-average discount rate (percentages), weighted based on the remaining balance of lease payments			7.9%

The following table provides certain cash flow and supplemental noncash information related to our lease liabilities for the nine months ended September 30, 2022:



Operating Leases:
Cash paid for amounts included in the measurement of lease liabilities	$	7,292

6. Investments in Affiliates and Related Transactions

Sequential Technology International, LLC

In connection with the divestiture of the exception handling business of the Company in 2017, Synchronoss entered into a three-year Cloud Telephony and Support services agreement (“CTS Agreement”) to grant Sequential Technology International, LLC (“STIN”) access to certain Synchronoss software and private branch exchange systems to facilitate exception handling operations required to support STIN customers.

During the second quarter of 2020, the Company entered into an agreement with STIN and AP Capital Holdings II, LLC (“APC”) to divest its remaining equity interest in STIN as well as settle its paid-in-kind purchase money note (“PIK note”) and certain amounts due as of December 31, 2019 in consideration for a $9.0 million secured promissory note (the “Note”), which includes contingent consideration of up to $16.0 million. The Note has an 8% interest rate and the maturity date is April 27, 2025. As part of the arrangement, APC acquired a majority stake of STIN. Additionally, in the event of a sale of STIN by APC and STIN at a future date, the Company shall receive 5% of such sale proceeds, after reducing the sale proceeds by any outstanding amounts of the above Note, including any earned contingent consideration. The Company determined the fair value of the Note as of the transaction date to be approximately $4.8 million. The Company determined the fair value of the Note using a discounted cash flow analysis, which discounts the expected future cash flows of the asset to determine its fair value. The fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement. No gain or loss was recognized as a result of the transaction. As of September 30, 2022, the Company reassessed the fair value of the Note and there were no material changes.

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In accordance with the terms of the agreement, STIN has made the required payments to the Company as of September 30, 2022.

7. Debt

Offering of Senior Notes

On June 30, 2021, the Company closed its underwritten public offering of $120.0 million aggregate principal amount of 8.375% senior notes due 2026 at a par value of $25.00 per senior note (the “Senior Notes”). The offering was conducted pursuant to an underwriting agreement (the “Notes Underwriting Agreement”) dated June 25, 2021, by and among the Company and B. Riley Securities, Inc., as representative of the several underwriters (the “Notes Underwriters”). At the closing, the Company issued $125.0 million aggregate principal amount of Senior Notes, inclusive of $5.0 million aggregate principal amount of Senior Notes issued pursuant to the full exercise of the Notes Underwriters’ option to purchase additional Senior Notes.

The Notes Underwriting Agreement contains customary representations, warranties and covenants of the Company, customary conditions to closing, indemnification obligations of the Company and the Notes Underwriters, including for liabilities under the Securities Act, other obligations of the parties and termination provisions.

On June 30, 2021, the Company entered into an indenture (the “Base Indenture”) and a supplemental indenture (the “First Supplemental Indenture” and, together with the Base Indenture, the “Indenture”) with The Bank of New York Mellon Trust Company National Association, as trustee (the “Trustee”), between the Company and the Trustee. The Indenture establishes the form and provides for the issuance of the Senior Notes.

The Senior Notes are senior unsecured obligations of the Company and rank equally in right of payment with all of the Company’s existing and future senior unsecured and unsubordinated indebtedness. The Senior Notes are effectively subordinated in right of payment to all of the Company’s existing and future secured indebtedness to the extent of the value of the assets securing such indebtedness and structurally subordinated to all existing and future indebtedness of the Company’s subsidiaries, including trade payables. The Senior Notes bear interest at the rate of 8.375% per annum. Interest on the Senior Notes is payable quarterly in arrears on January 31, April 30, July 31 and October 31 of each year, commencing on July 31, 2021. The Senior Notes will mature on June 30, 2026, unless redeemed prior to maturity.

The Company may, at its option, at any time and from time to time, redeem the Senior Notes for cash in whole or in part (i) on or after June 30, 2022 and prior to June 30, 2023, at a price equal to $25.75 per Senior Note, plus accrued and unpaid interest to, but excluding, the date of redemption, (ii) on or after June 30, 2023 and prior to June 30, 2024, at a price equal to $25.50 per Senior Note, plus accrued and unpaid interest to, but excluding, the date of redemption, (iii) on or after June 30, 2024 and prior to June 30, 2025, at a price equal to $25.25 per Senior Note, plus accrued and unpaid interest to, but excluding, the date of redemption, and (iv) on or after June 30, 2025 and prior to maturity, at a price equal to 100% of their principal amount, plus accrued and unpaid interest to, but excluding, the date of redemption. On and after any redemption date, interest will cease to accrue on the redeemed Senior Notes.

The Indenture contains customary events of default and cure provisions. If an uncured default occurs and is continuing, the Trustee or the holders of at least 25% of the principal amount of the Senior Notes may declare the entire amount of the Senior Notes, together with accrued and unpaid interest, if any, to be immediately due and payable. In the case of an event of default involving the Company’s bankruptcy, insolvency or reorganization, the principal of, and accrued and unpaid interest on, the principal amount of the Senior Notes, together with accrued and unpaid interest, if any, will automatically, and without any declaration or other action on the part of the Trustee or the holders of the Senior Notes, become due and payable.

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(Amounts in tables in thousands, except for per share data or unless otherwise noted)

On October 25, 2021, the Company entered into an At Market Issuance Sales Agreement (the “Sales Agreement”) between the Company and B. Riley Securities, Inc. (the “Agent”), a related party, pursuant to which the Company may offer and sell, from time to time, up to $18.0 million of the Company’s 8.375% Senior Notes due 2026. Sales of the additional Senior Notes pursuant to the Sales Agreement, if any, may be made in transactions that are deemed to be “at the market offerings” as defined in Rule 415 under the Securities Act of 1933, as amended (the “Securities Act”). Under the Sales Agreement, the Agent will be entitled to compensation of 2.0% of the gross proceeds of all notes sold through it as the Company’s agent.

During the fourth quarter of 2021, the Company sold an additional $16.1 million aggregate principal amount of Senior Notes pursuant to the Sales Agreement. The additional Senior Notes sold have terms identical to the initial Senior Notes and are fungible and vote together with, the initial Senior Notes. The Senior Notes are listed and trade on The Nasdaq Global Market under the symbol “SNCRL.”

The carrying amounts of the Company’s borrowings were as follows:


Senior Notes	September 30, 2022		December 31, 2021
8.375% Senior Notes due 2026	$	141,077	$	141,077
Unamortized discount and debt issuance cost1	(6,877)		(7,973)
Carrying value of Senior Notes	$	134,200	$	133,104

________________________________

1 Debt issuance costs are deferred and amortized into interest expense using the effective interest method.

The total fair value of the outstanding Senior Notes was $124.0 million as of September 30, 2022. The Company is in compliance with its debt covenants as of September 30, 2022.

2019 Revolving Credit Facility

On October 4, 2019, the Company entered into a Credit Agreement with Citizens Bank, N.A., for a $10.0 million Revolving Credit Facility. Borrowings under the Revolving Credit Facility bore interest at a rate equal to, at the Company’s option, either (1) the arithmetic average of the LIBOR rate determined by reference to the costs of funds for U.S. dollar deposits for the interest period (one, three or six months (or 12 months if agreed to by all applicable Lenders)) as selected by the Company relevant to such borrowing plus the applicable margin, or (2) a base rate determined by reference to the greatest of the federal funds rate plus 0.5%, the prime commercial lending rate as determined by the Agent, and the daily LIBOR rate plus 1.0%, in each case plus an applicable margin and subject to a floor of 0.5%.

On June 30, 2021, the Company paid off the outstanding balance and closed the Revolving Credit Facility.

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Interest expense

The following table summarizes the Company’s interest expense:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021			2022		2021
2021 Non-Convertible Senior Notes due 2026:
Amortization of debt issuance costs	$	352	$	306		$	1,030	$	306
Interest on borrowings	2,954		2,617			8,862		2,617
Amortization of debt discount	22		—			66		—
2019 Revolving Credit Facility:
Amortization of debt issuance costs	—		—			—		84

Interest on borrowings	—		—			—		126
Tax - ASC 740/FIN 48 Interest	92		—			92		—
Other	43		10			81		39
Total	$	3,463	$	2,933		$	10,131	$	3,172

8. Accumulated Other Comprehensive (Loss) / Income

The changes in accumulated other comprehensive (loss) income during the nine months ended September 30, 2022 were as follows:


	Balance at December 31, 2021		Other comprehensive loss		Tax effect		Balance at September 30, 2022
Foreign currency	$	(29,350)	$	(28,647)			$	(57,997)
Unrealized (loss) income on intercompany foreign currency transactions	(3,635)		191		(76)		(3,520)

Total	$	(32,985)	$	(28,456)	$	(76)	$	(61,517)

9. Capital Structure

Common Stock

Each holder of common stock is entitled to vote on all matters and is entitled to one vote for each share held. Dividends on common stock will be paid when, and if, declared by the Company’s Board of Directors. No dividends have ever been declared or paid by the Company.

Common Stock Offering

On June 29, 2021, the Company closed its underwritten public offering of common stock, par value $0.0001 per share. The offering was conducted pursuant to an underwriting agreement (the “Underwriting Agreement”) dated June 24, 2021, by and between the Company and B. Riley Securities, Inc., as representative of the several underwriters (the “Underwriters”) for net proceeds of $102.3 million. At the closing, the Company issued 42,307,692 shares of common stock, inclusive of 3,846,154

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shares of common stock issued pursuant to the full exercise of the Underwriters’ option to purchase additional shares of common stock. The Company used the net proceeds for the redemption of the Series A Convertible Preferred Stock.

Shelf Registration Statement

On August 19, 2020, the Company filed a universal shelf registration statement with the SEC for the issuance of common stock, preferred stock, debt securities, guarantees of debt securities, warrants and units up to an aggregate amount of $250.0 million (“the 2020 Shelf Registration Statement”). On August 28, 2020, the 2020 Shelf Registration Statement was declared effective by the SEC. As of September 30, 2022, except for the Common Stock offering and the issuance of Senior Notes, the Company has not raised additional capital using the 2020 Shelf Registration Statement.

Preferred Stock

The Company’s Board of Directors (the “Board”) is authorized to issue preferred shares and has the discretion to determine the rights, preferences, privileges and restrictions, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences of preferred stock.

Series B Non-Convertible Preferred Stock

On June 30, 2021, the Company closed a private placement of 75,000 shares of its Series B Perpetual Non-Convertible Preferred Stock, par value $0.0001 per share, with an initial liquidation preference of $1,000 per share (the “Series B Preferred Stock”), for net proceeds of $72.5 million (the “Series B Transaction”). The sale of the Series B Preferred Stock was pursuant to the Series B Preferred Stock Purchase Agreement, dated as of June 24, 2021 (the “Series B Purchase Agreement”), between the Company and B. Riley Principal Investments, LLC (“BRPI”).

In connection with the closing of the Series B Transaction, the Company (i) filed a Certificate of Designation with the State of Delaware setting forth the rights, preferences, privileges, qualifications, restrictions and limitations on the Series B Preferred Stock (the “Series B Certificate”) and (ii) entered into an Investor Rights Agreement with B. Riley Financial, Inc. (“B. Riley Financial”) and BRPI setting forth certain governance and registration rights of B. Riley Financial with respect to the Company.

Certificate of Designation of the Series B Preferred Stock

The rights, preferences, privileges, qualifications, restrictions and limitations of the shares of Series B Preferred Stock are set forth in the Series B Certificate. Under the Series B Certificate, the holders of the Series B Preferred Stock are entitled to receive, on each share of Series B Preferred Stock on a quarterly basis, an amount equal to the dividend rate, as described in the following sentence, divided by four and multiplied by the then-applicable Liquidation Preference per share of Series B Preferred Stock (collectively, the “Preferred Dividends”). The dividend rate is (1) 9.5% per annum for the period commencing on June 30, 2021 and ending on and including December 31, 2021, (2) 13% per annum for the year commencing on January 1, 2022 and ending on and including December 31, 2022; and (3) 14% per annum for the year commencing on January 1, 2023 and thereafter. The Preferred Dividends will be due in cash on January 1, April 1, July 1 and October 1 of each year (each, a “Series B Dividend Payment Date”). The Company may choose to pay the Series B Preferred Dividends in cash or in additional shares of Series B Preferred Stock. In the event the Company does not declare and pay a dividend in cash on any Series B Dividend Payment Date, the unpaid amount of the Preferred Dividend will be added to the Liquidation Preference. As of September 30, 2022, the Liquidation Value and Redemption Value of the Series B Preferred Shares was $73.0 million.

On and after the fifth anniversary of the date of issuance, holders of shares of Series B Preferred Stock will have the right to cause the Company to redeem each share of Series B Preferred Stock for cash in an amount equal to the sum of the current liquidation preference and any accrued dividends. Each share of Series B Preferred Stock will also be redeemable at the option of the holder upon the occurrence of a “Fundamental Change” at (i) par in the case of a payment in cash or (ii) 1.5 times par in the case of payment in shares of Common Stock (such shares being, “Registrable Securities”), subject to certain limitations on the amount of stock that could be issued to the holders of Series B Stock. In addition, the Company will be permitted to redeem outstanding shares of the Series B Preferred Stock at any time for the sum of the then-applicable Liquidation Preference and the accrued but unpaid dividends. Pursuant to the Series B Certificate, the Company will be required to use (i) the first $50.0 million of proceeds from certain transactions (i.e., disposition, sale of assets, tax refunds) received by the Company to

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redeem for cash, shares of the Series B Preferred Stock, on a pro rata basis among each holder of Series B Preferred Stock and (ii) the next $25.0 million of proceeds from certain transactions received by the Company may be used by the Company to buy back shares of Common Stock and to the extent, not used for such purpose by the Company, to redeem, for cash, shares of the Series B Preferred Stock, on a pro rata basis among each holder of the Series B Preferred Stock.

The Company shall be required to obtain the prior written consent of the holders holding at least a majority of the outstanding shares of the Series B Preferred Stock before taking certain actions, including: (i) certain dividends, repayments and redemptions; (ii) any amendment to the Company’s certificate of incorporation that adversely affects the rights, preferences, privileges or voting powers of the Series B Preferred Stock; and (iii) issuances of stock ranking senior or equivalent to shares of the Series B Preferred Stock (including additional shares of the Series B Preferred Stock) in the priority of payment of dividends or in the distribution of assets upon any liquidation, dissolution or winding up of the Company. Other than with respect to the foregoing consent rights, the Series B Preferred Stock is non-voting stock.

Investor Rights Agreement

On June 30, 2021, the Company, B. Riley Financial and BRPI entered into an Investor Rights Agreement (the “Investor Rights Agreement”). Pursuant to the Investor Rights Agreement, for so long as affiliates of B. Riley Financial beneficially own at least 10% of the outstanding shares of common stock (unless such equity threshold percentage is not met due to dilution from equity issuances), B. Riley Financial is entitled to nominate one Class II director (the “B. Riley Nominee”) to the Company’s board of directors (the “Board”), who shall be an employee of B. Riley Financial or its affiliates and is approved by the Board, such approval not to be unreasonably withheld. For so long as affiliates of B. Riley Financial beneficially own 5% or more but less than 10% of the outstanding shares of common stock (unless such equity threshold percentage is not met due to dilution from equity issuances), B. Riley Financial is entitled to certain board observer rights.

A summary of the Company’s Series B Perpetual Non-Convertible Preferred Stock balance at September 30, 2022 and changes during the nine months ended September 30, 2022, are presented below:


	Series B Preferred Stock
	Shares	Amount
Balance at December 31, 2021	75	$	72,505
Issuance of Series B preferred stock	—	—
Issuance costs related to preferred stock	—	—
Amortization of preferred stock issuance costs	—	143
Issuance of preferred PIK dividend	3	2,438



Redemption of Series B preferred shares	(7)	(6,738)
Balance at September 30, 20221	71	$	68,348

________________________________

1 Series B preferred stock principal balance of $70.7 million is presented net of $2.4 million unamortized issuance costs.

On April 1, 2022 the Company paid in-kind the accrued Series B Perpetual Non-Convertible Preferred Stock dividend of $2.4 million. On April 18, 2022, the Company made a $2.5 million principal and interest payment to redeem 2,438 shares of Series B Preferred Stock. On May 10, 2022, the Company made an additional $4.4 million principal and interest payment to redeem 4,300 shares of Series B Preferred Stock.

On October 3, 2022 the Company paid the accrued Series B Perpetual Non-Convertible Preferred Stock dividend of $2.3 million in form of cash.

Series A Convertible Preferred Stock

In accordance with the terms of the Share Purchase Agreement dated as of October 17, 2017 (the “PIPE Purchase Agreement”), with Silver Private Holdings I, LLC, an affiliate of Siris (“Silver”), on February 15, 2018, the Company issued to Silver 185,000 shares of its newly issued Series A Convertible Participating Perpetual Preferred Stock (the “Series A Preferred

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Stock”), par value $0.0001 per share, with an initial liquidation preference of $1,000 per share, in exchange for $97.7 million in cash and the transfer from Silver to the Company of the 5,994,667 shares of the Company’s common stock held by Silver (the “Preferred Transaction”).

Redemption of Series A Preferred Stock

The net proceeds from the common stock public offering, Senior Note offering and the Series B transaction was used in part to fully redeem all outstanding shares of the Company’s Series A Preferred Stock on June 30, 2021 (the “Redemption”). The Company redeemed in full all of the 268,917 outstanding shares of the Series A Preferred Stock for an aggregate Redemption Price of $278.7 million and all rights under the Investor Rights Agreement relating to the Series A Preferred Stock were terminated effective with the Redemption. No Series A Preferred Stock remain outstanding or authorized as of September 30, 2022.

Registration Rights

The Investor Rights Agreement entered into on June 30, 2021 provides that in the event Synchronoss issues Registrable Securities to the holders of Series B Preferred Stock, such holders will have certain demand and piggy-back registration rights with respect to such Registrable Securities. In addition, on June 30, 2021, in connection with the redemption of the Series A Preferred Stock, the Investor Rights Agreement between the Company and Silver terminated.

Stock Plans

At the annual meeting of stockholders the Company held on June 16, 2022, the stockholders of the Company approved and adopted the Certificate of Amendment of the Company’s restated certificate of incorporation to increase the total number of shares of authorized common stock from 100 million shares to 150 million shares.

As of September 30, 2022, there were 7.9 million shares available for the grant or award under the Company’s 2015 Equity Incentive Plan and 0.5 million shares available for the grant or award under the Company’s 2017 New Hire Equity Incentive Plan.

The Company’s performance cash awards granted to executives under the Long Term Incentive (“LTI”) Plans have been accounted for as liability awards, due to the Company’s intent and the ability to settle such awards in cash upon vesting and the Company has reflected such awards in accrued expenses. As of September 30, 2022, the liability for such awards is approximately $0.6 million.

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Stock-Based Compensation

The following table summarizes stock-based compensation expense related to all of the Company’s stock awards included by operating expense categories, as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021			2022		2021
Cost of revenues	$	232	$	432		$	592	$	1,289
Research and development	494		725			1,366		2,276
Selling, general and administrative	1,075		1,132			2,734		3,790
Total stock-based compensation expense	$	1,801	$	2,289		$	4,692	$	7,355

The following table summarizes stock-based compensation expense related to all of the Company’s stock awards included by award type, as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021			2022		2021
Stock options	$	779	$	1,064		$	2,019	$	2,912
Restricted stock awards	933		1,373			2,320		4,412
Performance Based Cash Units	89		(148)			353		31

Total stock-based compensation before taxes	$	1,801	$	2,289		$	4,692	$	7,355
Tax benefit	$	364	$	420		$	931	$	1,357

The total stock-based compensation cost related to unvested equity awards as of September 30, 2022 was approximately $10.0 million. The expense is expected to be recognized over a weighted-average period of approximately 2.1 years.

The total stock-based compensation cost related to unvested performance based cash units as of September 30, 2022 was approximately $0.9 million. The expense is expected to be recognized over a weighted-average period of approximately 1.9 years.

Stock Options

The Company uses the Black-Scholes option pricing model for determining the estimated fair value for stock options. The weighted-average assumptions used in the Black-Scholes option pricing model are as follows:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021				2022			2021
Expected stock price volatility	74.1		%	78.5		%		74.1		%	82.9		%
Risk-free interest rate	3.0		%	0.6		%		3.1		%	0.6		%
Expected life of options (in years)	4.17			4.20				4.15			4.24
Expected dividend yield	0.0		%	0.0		%		0.0		%	0.0		%
Weighted-average fair value (PSV) of the options	$	0.70		$	1.72			$	0.71		$	1.88

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The following table summarizes information about stock options outstanding as of September 30, 2022:


Options	Number of Options	Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Outstanding at December 31, 2021	4,715	$	6.53
Options Granted	3,009	1.22
Options Exercised	—	—
Options Cancelled	(710)	10.55
Outstanding at September 30, 2022	7,014	$	3.85	5.44	$	—
Vested and exercisable at September 30, 2022	2,571	$	7.14	3.88	$	—

The total intrinsic value of stock options exercisable was nil at September 30, 2022 and 2021, respectively. The total intrinsic value of stock options exercised was nil and nil during the nine months ended September 30, 2022 and 2021, respectively.

Awards of Restricted Stock and Performance Stock

A summary of the Company’s unvested restricted stock at September 30, 2022, and changes during the nine months ended September 30, 2022, is presented below:


Unvested Restricted Stock	Number of Awards	Weighted- Average Grant Date Fair Value
Unvested at December 31, 2021	2,574	$	3.57
Granted	3,163	1.26
Granted adjustment1	63	1.64
Vested	(748)	4.33
Forfeited	(273)	3.14
Unvested at September 30, 2022	4,779	$	1.90

___________________________

1 Represents performance based cash units grants that vested and were paid out in form of shares of stock during the period.

Restricted stock awards are granted subject to service conditions or service and performance conditions. Restricted stock awards (“RSA”) and performance based restricted stock awards (“PRSA”) are measured at the closing stock price at the date of grant and the expense is recognized straight line over the requisite service period.

Performance Based Cash Units

Performance based cash units (“PBCU”) generally vest at the end of a three-year period based on service and achievement of certain performance objectives determined by the Company’s Board of Directors.

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A summary of the Company’s unvested performance based cash units at September 30, 2022 and changes during the nine months ended September 30, 2022, is presented below:


Unvested Cash Units	Number of Units	Period End Fair Value
Unvested at December 31, 2021	1,996	$	2.44
Granted	4,622	—
Granted adjustment1	(216)	—
Vested	(63)	—
Forfeited	(168)	—
Unvested at September 30, 2022	6,171	$	1.14

___________________________

1 Includes changes in the unvested performance based cash units due to performance adjustments.

Performance based cash units are measured at the closing stock price at the reporting period end date and the expense is recognized straight line over the requisite service period. The expense for the period will increase or decrease based on updated fair values of these units at each reporting date. Unvested units’ fluctuations are shown as adjustments to units granted in the table above. These fluctuations are based on the percentage achievement of the performance metrics at the end of each reporting period.

10. Income Taxes

The Company recognized an income tax expense of approximately $1.7 million and an income tax benefit of approximately $7.3 million during the nine months ended September 30, 2022 and 2021, respectively. The effective tax rate was approximately 21.9% for the nine months ended September 30, 2022, which approximated the U.S. federal statutory rate. The Company’s effective tax rate was approximately 24.3% for the nine months ended September 30, 2021, which was higher than the U.S. federal statutory rate primarily due to discrete income tax benefit recorded in the period associated with the finalization of the Company’s U.S. federal income tax return, which reflected a net operating loss that was carried back to prior tax years. Based on the final carryback claim, the Company recorded a discrete income tax benefit of $7.4 million and discrete income tax expense related to a liability for unrecognized tax benefits in the amount of $2.1 million, all of which, if recognized, would impact the Company’s effective tax rate. This increase was partially offset by pre-tax losses in jurisdictions where full valuation allowances have been recorded, pre-tax losses in jurisdictions which have a zero tax rate, and certain foreign jurisdictions projecting current income tax expense. The Company continues to consider all available evidence, including historical profitability and projections of future taxable income together with new evidence, both positive and negative, that could affect the view of the future realization of deferred tax assets. As a result of the assessment, no change was recorded by the Company to the valuation allowance during the nine months ended September 30, 2022.

On March 11, 2021 the American Rescue Plan Act ("ARPA") was signed into law which is aimed at addressing the continuing economic and health impacts of the COVID-19 pandemic. This legislation relief, along with the previous governmental relief packages provide for numerous changes to current tax law. The ARPA does not have a material impact on the Company’s financial statements in the period ending September 30, 2022.

On August 16, 2022, the Inflation Reduction Act of 2022 ("IRA") was signed into law. This legislation includes significant changes relating to tax, climate change, energy and health care. Among other provisions, the IRA introduces a book minimum tax assessed on financial statement income of certain large corporations and an excise tax on share repurchases. The Company does not anticipate these provisions will have a material impact on our results of operations or financial position, when effective.

During 2021 the Internal Revenue Service commenced an audit of certain of the Company’s prior year U.S. federal income tax filings, including the 2013 through 2020 tax years. The audit is currently ongoing and the while receipt of the associated refunds would materially improve its financial position, the Company does not believe that the results of this audit will have a material effect on its results of operations.

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(Amounts in tables in thousands, except for per share data or unless otherwise noted)

The Company received $4.3 million in federal tax refunds in the second quarter of 2022. There is no change to the Company’s position on the remaining tax refunds.

11. Restructuring

The Company continues to execute certain restructurings to identify workforce optimization opportunities to better align the Company’s resources with its key strategic priorities. A summary of the Company’s restructuring accrual at September 30, 2022 and changes during the nine months ended September 30, 2022, are presented below:


	Balance at December 31, 2021		Charges		Payments		Other Adjustments		Balance at September 30, 2022
Employment termination costs	$	3,247	$	1,905	$	(3,582)	$	(152)	$	1,418

12. Earnings per Common Share (“EPS”)

Basic EPS is computed based upon the weighted average number of common shares outstanding for the year. Diluted EPS is computed based upon the weighted average number of common shares outstanding for the year plus the dilutive effect of common stock equivalents using the treasury stock method and the average market price of the Company’s common stock for the year. The Company includes participating securities (Redeemable Convertible Preferred Stock - Participation with Dividends on Common Stock that contain preferred dividend) in the computation of EPS pursuant to the two-class method. The two-class method of computing earnings per share is an allocation method that calculates earnings per share for common stock and participating securities. During periods of net loss, no effect is given to the participating securities because they do not share in the losses of the Company.

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(Amounts in tables in thousands, except for per share data or unless otherwise noted)

The following table provides a reconciliation of the numerator and denominator used in computing basic and diluted net income attributable to common stockholders per common share from operations.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021			2022		2021
Numerator - Basic:
Net income (loss) from operations	$	1,086	$	(8,109)		$	5,970	$	(22,895)
Net (loss) income attributable to redeemable noncontrolling interests	(66)		—			(256)		286
Preferred stock dividend	(2,298)		(1,722)			(7,255)		(33,728)



Net income (loss) attributable to Synchronoss	$	(1,278)	$	(9,831)		$	(1,541)	$	(56,337)

Numerator - Diluted:
Net income (loss) from operations attributable to Synchronoss	$	(1,278)	$	(9,831)		$	(1,541)	$	(56,337)




Net income (loss) attributable to Synchronoss	$	(1,278)	$	(9,831)		$	(1,541)	$	(56,337)

Denominator:
Weighted average common shares outstanding — basic	86,400		85,646			86,156		57,662





Weighted average common shares outstanding — diluted	86,400		85,646			86,156		57,662


Earnings (loss) per share:



Basic	$	(0.01)	$	(0.11)		$	(0.02)	$	(0.98)



Diluted	$	(0.01)	$	(0.11)		$	(0.02)	$	(0.98)


Anti-dilutive stock options excluded	—		—			—		—
Unvested shares of restricted stock awards	4,779		2,319			4,779		2,319

13. Commitments, Contingencies and Other

Non-cancelable agreements

The Company has various non-cancelable arrangements such as services for hosting, support, and software that expire at various dates, with the latest expiration in 2025.

Aggregate annual future minimum payments under non-cancelable agreements as of September 30, 2022 are as follows:


Year	Non-cancelable agreements
2022	$	6,349
2023	19,002
2024	17,490
2025	10,601
Total	$	53,442

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(Amounts in tables in thousands, except for per share data or unless otherwise noted)

Legal Matters

In the ordinary course of business, the Company is regularly subject to various claims, suits, regulatory inquiries and investigations. The Company records a liability for specific legal matters when it determines that the likelihood of an unfavorable outcome is probable, and the loss can be reasonably estimated. Management has also identified certain other legal matters where they believe an unfavorable outcome is not probable and, therefore, no reserve is established. Although management currently believes that resolving claims against the Company, including claims where an unfavorable outcome is reasonably possible, will not have a material impact on the Company’s business, financial position, results of operations, or cash flows, these matters are subject to inherent uncertainties and management’s view of these matters may change in the future. The Company also evaluates other contingent matters, including income and non-income tax contingencies, to assess the likelihood of an unfavorable outcome and estimated extent of potential loss. It is possible that an unfavorable outcome of one or more of these lawsuits or other contingencies could have a material impact on the liquidity, results of operations, or financial condition of the Company.

In the third quarter of 2017, the SEC and Department of Justice initiated investigations in connection with certain financial transactions that the Company effected in 2015 and 2016 and its disclosure of and accounting for such transactions, which the Company restated in the third quarter of 2018 in its restated annual and quarterly financial statements for 2015 and 2016. On June 7, 2022 the SEC approved the Offer of Settlement and filed an Order Instituting Cease-And-Desist Proceedings pursuant to Section 21C of the Securities Exchange Act of 1934, Making Findings, and Imposing a Cease-And-Desist Order (the “SEC Order”). Pursuant to the terms of the SEC Order, the Company consented to pay a civil penalty in the amount of $12.5 million in equal quarterly installments over two years and to cease and desist from committing or causing any violations of Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and the associated rules thereunder. The expense associated with this settlement of the SEC Order has previously been accrued in the Company’s financial statements. Also on June 7, 2022, the SEC filed a civil action against two former members of the Company’s management team, alleging misconduct arising out of the restated transactions that took place in 2015 and 2016 investigated by the SEC as set forth above. The Company may be required to indemnify the former members of management in that action. Due to the inherent uncertainty of litigation, the Company cannot predict the outcome of the litigation and can give no assurance that the asserted claims will not have a material adverse effect on its financial position, prospects, or results of operations.

Except as set forth above, the Company is not currently subject to any other legal proceedings that could have a material adverse effect on its operations; however, the Company may from time to time become a party to various legal proceedings arising in the ordinary course of our business.

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(Amounts in tables in thousands, except for per share data or unless otherwise noted)

14. Additional Financial Information

Other Income (expense), net

The following table sets forth the components of Other Income (expense), net included in the Condensed Consolidated Statements of Operations:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
FX gains (losses)1	$	4,810	$	(1,752)	$	10,424	$	(4,055)
Government refunds2	35		195		128		199
Income from sale of intangible assets3	—		—		—		550
Other4	(408)		(112)		(346)		(183)
Total	$	4,437	$	(1,669)	$	10,206	$	(3,489)

________________________________

1 Represents foreign exchange gains and losses

2 Represents government and tax refunds

3 Represents gain on sale on the Company’s IP addresses and Patents

4 Represents an aggregate of individually immaterial transactions

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to provide a reader of our financial statements with a narrative from the perspective of our management on our financial condition, results of operations, liquidity and certain other factors that may affect our future results. The following discussion and analysis should be read in conjunction with our Condensed Consolidated Financial Statements and the related notes included in Item 1 “Financial Information” of this Form 10-Q.

The words “Synchronoss,” “we,” “our,” “ours,” “us,” and the “Company” refer to Synchronoss Technologies, Inc. and its consolidated subsidiaries. This quarterly report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties and are based on the beliefs and assumptions of our management based on information currently available to our management. Use of words such as “believes,” “expects,” “anticipates,” “intends,” “plans,” “hopes,” “should,” “continues,” “seeks,” “likely” or similar expressions, indicate a forward-looking statement. Forward-looking statements are not guarantees of future performance and involve risks, uncertainties and assumptions, including, but not limited to, risks, uncertainties and assumptions relating to the duration and severity of the COVID-19 pandemic and its impact on our business and financial performance. Actual results may differ materially from the forward-looking statements we make. We caution investors not to place substantial reliance on the forward-looking statements included in this quarterly report. These statements speak only as of the date of this quarterly report, and we undertake no obligation to update or revise the statements in light of future developments. All numbers are expressed in thousands unless otherwise stated.

Overview

Synchronoss is a leading provider of white label cloud, messaging, digital and network management solutions that enable our customers to keep subscribers, systems, networks and content in sync. We help our customers to connect, engage and monetize subscribers in more meaningful ways by providing trusted platforms through which end users can sync and store content and connect with one another and the brands they love. Our mission is to help our customers create new revenue streams, reduce the cost of innovation, and captivate their subscribers.

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Our core product sets allow our customers to create a positive experience throughout their subscribers’ lifecycle by engaging, onboarding and managing the network to ensure reliable service.

•ENGAGE:

◦Personal Cloud: Backup, manage and engage with content.

◦Advanced Messaging: multi-channel messaging, peer-to-peer (“P2P”) communications and application-to-person (“A2P”) commerce solutions.

◦Email Suite: White label consumer email solutions.

•ONBOARD:

◦Backup and Restore: Backup, view and restore subscriber content across operating systems and devices.

◦Content Transfer: Effortlessly move content between mobile devices.

•NETWORK:

◦Total Network Management (“TNM”): integrated application suite that designs, procures, manages and optimizes telecom network infrastructure.

The Company currently operates in and markets its solutions and services directly through its sales organizations in North America, Europe and Asia-Pacific.

Revenues

We generate most of our revenues on a per transaction or subscription basis, which is derived from contracts that extend up to 60 months from execution.

The future success of our business depends on the continued growth of Business-to-Business and Business-to-Business-to-Consumer driving customer transactions, and continued expansion of our platforms into the TMT Market globally through Cloud, Messaging and Digital markets. As such, the volume of transactions and our ability to expand our footprint in TMT and globally may result in revenue fluctuations on a quarterly basis.

Most of our revenues are recorded in U.S. dollars but as we continue to expand our footprint with international carriers, we will continue to be subject to currency translation that could affect our future net sales as reported in U.S. dollars.

Our top five customers accounted for 73.1% and 69.2% of net revenues for the nine months ended September 30, 2022 and September 30, 2021, respectively. Contracts with these customers typically run for three to five years. Of these customers, Verizon accounted for more than 10% of our revenues in 2022 and 2021. The loss of Verizon as a customer would have a material negative impact on our company. However, we believe that the costs incurred and subscriber disruption by Verizon to replace Synchronoss’ solutions would be substantial.

Current Trends Affecting Our Results of Operations

Business from our Synchronoss Personal Cloud™ solution has been driven by the growth in mobile devices globally that are becoming content rich. As these devices replace other traditional devices like PCs, the ability to securely back up content from mobile devices, sync it with other devices and share it with family, friends and business associates have become an essential need and subscriber expectation. Such devices include smartphones, connected cars, personal health and wellness devices and connected home devices. The need for the content from these devices to be stored in a common cloud is also expected to drive our business in the longer term.

Business from our traditional Synchronoss Messaging business (Email) has been driven by a resurgence in the need for white label secure messaging platforms that favor the Mobile Network Operator’s (“MNO”) business objectives and are not beholden to the objectives of a sponsoring over-the-top (“OTT”) platform. We believe that advanced messaging drives higher

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subscriber engagement than any other application in the market today and holds the potential to stimulate new revenue from traditional services and third-party brands. OTT global success has driven MNOs to look at opportunities to preempt and compete with the OTTs which provides a potential opportunity for Synchronoss’ future growth to be driven by the need of TMT companies including (and especially) MNOs to embrace Messaging as a Platform (“MaaP”). MaaP will allow TMT and MNOs to converse with subscribers in an efficient, automated way by streamlining the costs and increasing the effectiveness of self-care, as well as yielding cross-sell upselling of service plans, devices, bundles, etc. The Synchronoss Advanced Messaging Platform provides state of the art RCS-driven features including the ability to support advanced Peer to Peer communications and introduce new revenue streams driven by commerce and advertising via Application-to-Person capabilities.

To support our growth, which we expect to be driven by these favorable industry trends mentioned above, we plan to leverage modular components from our existing software platforms to build new products. We believe that these opportunities will continue to provide future benefits and position us for future revenue growth. We are also making investments in research and development of new products designed to enable us to grow rapidly in the mobile wireless market. Our purchase of capital assets and equipment may also increase based on aggressive deployment, subscriber growth and promotional offers for free or bundled storage by our major Tier 1 carrier customers.

We continue to expand our platforms into the converging TMT, MNO, and Digital spaces to enable connected devices to do more things across multiple networks, brands and communities. Our initiatives with our customers continue to grow both with regard to our current business as well as our new product offerings. We are also exploring additional opportunities to support our customer, product and geographic diversification strategies.

Discussion of the Condensed Consolidated Statements of Operations

Three months ended September 30, 2022 compared to the three months ended September 30, 2021

The following table presents an overview of our results of operations for the three months ended September 30, 2022 and 2021 (in thousands):


	Three Months Ended September 30,				$ Change
	2022		2021			2022 vs 2021
Net revenues	$	59,896	$	69,753		$	(9,857)
Cost of revenues1	22,440		27,245			(4,805)
Research and development	12,911		15,368			(2,457)
Selling, general and administrative	15,338		27,953			(12,615)
Restructuring charges	201		1,485			(1,284)
Depreciation and amortization	7,726		8,215			(489)
Total costs and expenses	58,616		80,266			(21,650)
Income (loss) from operations	$	1,280	$	(10,513)		$	11,793

________________________________

1 Cost of revenues excludes depreciation and amortization which are shown separately.

Net revenues decreased $9.9 million to $59.9 million for the three months ended September 30, 2022, compared to the same period in 2021. The change in revenue is mainly attributable to increased cloud revenue driven by continued subscriber growth which was more than offset by the (i) expected deferred revenue run-off in the current quarter, (ii) continued impact of DXP business unit divestiture, and (iii) lower professional service revenue and unfavorable foreign exchange movements in messaging.

Cost of revenues decreased $4.8 million to $22.4 million for the three months ended September 30, 2022, compared to the same period in 2021. The 2022 decrease was primarily attributable to unfavorable revenue changes and continued efforts to streamline our business operations, reduce costs and focus on higher margin products.

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Research and development expense decreased $2.5 million to $12.9 million for the three months ended September 30, 2022, compared to the same period in 2021. The research and development costs decreased year over year mainly as a result of executed cost savings initiatives to streamline our workforce and reduce vendor spend and overhead costs.

Selling, general and administrative expense decreased $12.6 million to $15.3 million for the three months ended September 30, 2022, compared to the same period in 2021. We executed significant strategic cost reductions by optimizing our workforce, reducing vendor spend and lowering facility costs. These strategic cost savings in addition to certain legal reserves recorded in the prior year and favorable foreign exchange movements, positively impacted our current period selling, general and administrative costs.

Restructuring charges were $0.2 million and $1.5 million for the three months ended September 30, 2022 and 2021, respectively, which primarily related to employment termination costs as a result of the work-force reductions initiated to reduce operating costs and align our resources with our key strategic priorities.

Depreciation and amortization expense decreased $0.5 million to $7.7 million for the three months ended September 30, 2022, compared to the same period in 2021. The 2022 decrease was primarily attributable to the expiration of amortizable acquired assets in combination with reduced capital expenditures mainly as a result of efforts to streamline business operations, partially offset by the increased amortization of capitalized software.

Income tax. The Company recognized an income tax expense of approximately $1.1 million and an income tax benefit of approximately $7.0 million during the three months ended September 30, 2022 and 2021, respectively. The effective tax rate was approximately 50.7% for the three months ended September 30, 2022, which was higher than the U.S. federal statutory rate primarily due to discrete income tax expense recorded in the period associated with the accrual of certain reserves for uncertain tax benefits, net of discrete income tax benefit recorded in the period associated with an increase in foreign R&D credits claimed on tax returns filed during the period. The Company’s effective tax rate was approximately 46.3% for the three months ended September 30, 2021, which was higher than the U.S. federal statutory rate primarily due to discrete income tax benefit recorded in the period associated with the finalization of the Company’s U.S. federal income tax return, which reflected a net operating loss that was carried back to prior tax years. Based on the final carryback claim, the Company recorded a discrete income tax benefit of $7.4 million and discrete income tax expense related to a liability for unrecognized tax benefits in the amount of $2.1 million, all of which, if recognized, would impact our effective tax rate. This increase was partially offset by pre-tax losses in jurisdictions where full valuation allowances have been recorded, pre-tax losses in jurisdictions which have a zero tax rate, and certain foreign jurisdictions projecting current income tax expense.

Discussion of the Condensed Consolidated Statements of Operations

Nine months ended September 30, 2022 compared to the nine months ended September 30, 2021

The following table presents an overview of our results of operations for the nine months ended September 30, 2022 and 2021 (in thousands):


	Nine Months Ended September 30,				$ Change
	2022		2021			2022 vs 2021
Net revenues	$	190,998	$	206,784		$	(15,786)
Cost of revenues1	69,595		83,024			(13,429)
Research and development	42,162		49,962			(7,800)
Selling, general and administrative	48,523		67,790			(19,267)
Restructuring charges	1,905		3,075			(1,170)
Depreciation and amortization	24,019		26,567			(2,548)
Total costs and expenses	186,204		230,418			(44,214)
Income (loss) from operations	$	4,794	$	(23,634)		$	28,428

________________________________

1 Cost of revenues excludes depreciation and amortization which are shown separately.

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Net revenues decreased $15.8 million to $191.0 million for the nine months ended September 30, 2022, compared to the same period in 2021. The change in revenue is mainly attributable to increased cloud revenue driven by continued subscriber growth which was more than offset by the (i) expected deferred revenue run-off in the current quarter, (ii) revenue received from a non-recurring advanced messaging contract in the prior year, lower professional service revenue and unfavorable foreign exchange movements in messaging, and (iii) continued impact of DXP business unit divestiture in digital.

Cost of revenues decreased $13.4 million to $69.6 million for the nine months ended September 30, 2022, compared to the same period in 2021. The 2022 decrease was primarily attributable to unfavorable revenue changes and continued efforts to streamline our business operations, reduce costs and focus on higher margin products.

Research and development expense decreased $7.8 million to $42.2 million for the nine months ended September 30, 2022, compared to the same period in 2021. The research and development costs decreased year over year mainly as a result of executed cost savings initiatives to streamline our workforce and reduce vendor spend.

Selling, general and administrative expense decreased $19.3 million to $48.5 million for the nine months ended September 30, 2022, compared to the same period in 2021. The 2022 decrease was primarily driven by cost savings initiatives and favorable foreign exchange movements as well as the the recognition of certain legal reserves in the prior year that had a favorable impact on current year results.

Restructuring charges decreased $1.2 million to $1.9 million for the nine months ended September 30, 2022, compared to the same period in 2021, which primarily related to employment termination costs as a result of the work-force reductions initiated to reduce operating costs and align our resources with our key strategic priorities.

Depreciation and amortization expense decreased $2.5 million to $24.0 million for the nine months ended September 30, 2022, compared to the same period in 2021. The 2022 decrease was primarily attributable to the expiration of amortizable acquired assets in combination with reduced capital expenditures mainly as a result of the data center consolidation project and efforts to streamline business operations, partially offset by the increased amortization of capitalized software.

Income tax. The Company recognized an income tax expense of $1.7 million and an income tax benefit of $7.3 million during the nine months ended September 30, 2022 and 2021, respectively. The effective tax rate was 21.9% for the nine months ended September 30, 2022, which approximated the U.S. federal statutory rate. The Company’s effective tax rate was approximately 24.3% for the nine months ended September 30, 2021, which was higher than the U.S. federal statutory rate primarily due to discrete income tax benefit recorded in the period associated with the finalization of the Company’s U.S. federal income tax return, which reflected a net operating loss that was carried back to prior tax years. Based on the final carryback claim, the Company recorded a discrete income tax benefit of $7.4 million and discrete income tax expense related to a liability for unrecognized tax benefits in the amount of $2.1 million, all of which, if recognized, would impact the Company’s effective tax rate. This increase was partially offset by pre-tax losses in jurisdictions where full valuation allowances have been recorded, pre-tax losses in jurisdictions which have a zero tax rate, and certain foreign jurisdictions projecting current income tax expense.

Liquidity and Capital Resources

As of September 30, 2022, our principal sources of liquidity were cash provided by operations and the remaining proceeds from the financing transactions. Our cash and cash equivalents balance was $22.6 million at September 30, 2022. We anticipate that our principal uses of cash and cash equivalents will be to fund our business, including technology expansion and working capital.

At September 30, 2022, our non-U.S. subsidiaries held approximately $6.8 million of cash and cash equivalents that are available for use by our operations around the world. At this time, we believe the funds held by all non-U.S. subsidiaries will be permanently reinvested outside of the U.S. However, if these funds were repatriated to the U.S. or used for U.S. operations, certain amounts could be subject to U.S. tax for the incremental amount in excess of the foreign tax paid. Due to the timing and circumstances of repatriation of these earnings, if any, it is not practical to determine the unrecognized deferred tax liability related to the amount.

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We believe that our cash, cash equivalents, financing sources, and our ability to manage working capital and expected positive cash flows generated from operations in combination with continued expense reductions will be sufficient to fund our operations for the next twelve months from the filing date of this Form 10-Q based on our current business plans. However, given the impact of the COVID-19 pandemic on the economy and our operations as well as geopolitical developments, we will continue to assess our liquidity needs. Given the economic uncertainty as a result of the pandemic, we have taken actions to improve our current liquidity position, including, reducing working capital, reducing operating costs and substantially reducing discretionary spending. Even with these actions however, an extended period of economic disruption could materially affect our business, results of operations, ability to meet debt covenants, access to sources of liquidity and financial condition. Our liquidity plans are subject to a number of risks and uncertainties, including those described in the "Forward-Looking Statements" section of this MD&A and Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021, some of which are outside of our control.

For further details, see Note 7. Debt and Note 9. Capital Structure of the Notes to Condensed Consolidated Financial Statements in Item 1 of this Form 10-Q.

Discussion of Cash Flows

A summary of net cash flows follows (in thousands):


	Nine Months Ended September 30,
	2022		2021
Net cash provided by (used in):
Operating activities	$	11,078	$	5,551
Investing activities	(8,271)		(17,840)
Financing activities	$	(10,975)	$	2,687

Our primary source of cash is receipts from revenue. The primary uses of cash are personnel and related costs, telecommunications and facility costs related primarily to our cost of revenue and general operating expenses including professional service fees, consulting fees, building and equipment maintenance and marketing expense.

Cash provided by operating activities for the nine months ended September 30, 2022 was $11.1 million as compared to $5.6 million of cash provided by operating activities for the same period in 2021. In the current period, the Company generated cash from operations mainly driven by continued growth in cloud subscribers, reduced operating costs, and $4.3 million tax refund received in the second quarter. The prior year’s cash provided from operations was positively impacted by a non-recurring cash payment for an advanced messaging contract.

Cash used in investing activities for the nine months ended September 30, 2022 was $8.3 million as compared to $17.8 million in cash used in investing activities during the same period in 2021. The cash used for investing activities in the current year and prior year was primarily related to increased investment in product development for our Cloud offering and capitalization of associated labor costs, in addition to annual vendor payments made in the current period. This investment was offset in the current period by the $8 million of cash received as part of the DXP and Activation sale.

Cash (used in) provided by financing activities for the nine months ended September 30, 2022 was $11.0 million of cash used primarily due to principal and interest payments associated with the redemption of Series B Preferred Stock. In 2021, the net proceeds from our public offering of common stock, Senior Note offering and Series B Preferred Stock transaction was primarily used to fully redeem all outstanding shares of the Company’s Series A Preferred Stock and repay and close the Revolving Credit Facility.

Effect of Inflation

Inflationary increases in certain input costs, such as occupancy, labor and benefits, and general administrative costs, have impacted our business. Management does not believe these impacts however have had a material impact on our results of

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operations during the nine months September 30, 2022 and 2021. We cannot assure you, however, that we will not be affected by general inflation in the future.

Contractual Obligations

Our contractual obligations consist of contingent consideration, office equipment and colocation services and contractual commitments under third-party hosting, software licenses and maintenance agreements. The following table summarizes our long-term contractual obligations as of September 30, 2022 (in thousands):


	Payments Due by Period
	Total		2022		2023-2025		2026-2027		Thereafter
Finance lease obligations	$	997	$	118	$	860	$	19	$	—
Interest	47,261		2,954		35,446		8,861		—
Operating lease obligations	44,367		2,346		23,876		13,881		4,264
Purchase obligations1	53,442		6,349		47,093		—		—
Senior Note Payable	141,077		—		—		141,077		—
Total	$	287,144	$	11,767	$	107,275	$	163,838	$	4,264

_______________________________

1 Amount represents obligations associated with colocation agreements and other customer delivery related purchase obligations.

Uncertain Tax Positions

Unrecognized tax positions of $5.0 million at September 30, 2022 are excluded from the table above as we are not able to reasonably estimate when we would make any cash payments required to settle these liabilities, but we do not believe that the ultimate settlement of our obligations will materially affect our liquidity. We anticipate that the balance of unrecognized tax benefits will decrease by approximately $0.5 million over the next twelve months.

Critical Accounting Policies and Estimates

Our condensed consolidated financial statements and accompanying notes have been prepared in accordance with U.S. GAAP. The preparation of these condensed consolidated financial statements in accordance with U.S. GAAP requires us to utilize accounting policies and make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingencies as of the date of the financial statements and the reported amounts of revenues and expenses during a fiscal period. The SEC considers an accounting policy to be critical if it is important to a company’s financial condition and results of operations, and if it requires significant judgment and estimates on the part of management in its application.

These estimates and assumptions take into account historical and forward looking factors that the Company believes are reasonable, including but not limited to the potential impacts continuing to arise from COVID-19 and public and private sector policies and initiatives aimed at reducing its transmission. As the extent and duration of the impacts from COVID-19 remain unclear, the Company’s estimates and assumptions may evolve as conditions change. Actual results could differ significantly from those estimates. If actual results or events differ materially from those contemplated by us in making these estimates, our reported financial condition and results of operations for future periods could be materially affected. See Part II, “Item 1A. Risk Factors” in this Form 10-Q for certain matters bearing risks on our future results of operations.

During the nine months ended September 30, 2022, there were no significant changes in our critical accounting policies and estimates discussed in our Form 10-K for the year ended December 31, 2021. Please refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2021 for a more complete discussion of our critical accounting policies and estimates.

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Recently Issued Accounting Standards

For a discussion of recently issued accounting standards see Note 2. Basis of Presentation and Consolidation included in Part I, Item 1. “Notes to Condensed Consolidated Financial Statements (unaudited)” of this Quarterly Report on Form 10-Q.

Off-Balance Sheet Arrangements

We had no off-balance sheet arrangements as of September 30, 2022 and December 31, 2021 that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk

The following discussion about market risk disclosures involves forward-looking statements. Actual results could differ materially from those projected in the forward-looking statements. We deposit our excess cash in what we believe are high-quality financial instruments, primarily money market funds and certificates of deposit and, we may be exposed to market risks related to changes in interest rates. We do not actively manage the risk of interest rate fluctuations on our marketable securities; however, such risk is mitigated by the relatively short-term nature of these investments. These investments are denominated in United States dollars.

The primary objective of our investment activities is to preserve our capital for the purpose of funding operations, while at the same time maximizing the income, we receive from our investments without significantly increasing risk. To achieve these objectives, our investment policy allows us to maintain a portfolio of cash equivalents and short- and long-term investments in a variety of securities, which could include commercial paper, money market funds and corporate and government debt securities. Our cash, cash equivalents and marketable securities at September 30, 2022 and December 31, 2021 were invested in liquid money market accounts, certificates of deposit and government securities. All market-risk sensitive instruments were entered into for non-trading purposes.

Foreign Currency Exchange Risk

We are exposed to translation risk because certain of our foreign operations utilize the local currency as their functional currency and those financial results must be translated into U.S. dollars. As currency exchange rates fluctuate, translation of the financial statements of foreign businesses into U.S. dollars affects the comparability of financial results between years.

We do not hold any derivative instruments and do not engage in any hedging activities. Although our reporting currency is the U.S. dollar, we may conduct business and incur costs in the local currencies of other countries in which we may operate, make sales and buy materials and services. As a result, we are subject to foreign currency transaction risk. Further, changes in exchange rates between foreign currencies and the U.S. dollar could affect our future net sales, cost of sales and expenses and could result in foreign currency transaction gains or losses.

We cannot accurately predict future exchange rates or the overall impact of future exchange rate fluctuations on our business, results of operations and financial condition. To the extent that our international activities recorded in local currencies increase in the future, our exposure to fluctuations in currency exchange rates will correspondingly increase and hedging activities may be considered if appropriate.

Interest Rate Risk

We are exposed to the risk of interest rate fluctuations on the interest income earned on our cash and cash equivalents. A hypothetical 100 basis point movement in interest rates applicable to our cash and cash equivalents outstanding at September 30, 2022 would increase interest income by approximately $0.2 million on an annual basis.

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ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the registrant’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934), as of the end of the period covered by this quarterly report, that ensure that information relating to the registrant which is required to be disclosed in this report is recorded, processed, summarized and reported within required time periods using the criteria for effective internal control established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that the registrant’s disclosure controls and procedures were effective as of September 30, 2022.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting identified in management's evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the period covered by this Quarterly Report on Form 10-Q that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating the disclosure controls and procedures and internal control over financial reporting, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures and internal control over financial reporting must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

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PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

For a discussion of our material pending legal proceedings that could impact our results of operations, financial condition or cash flows see Note 13. Commitments, Contingencies and Other included in Part I, Item 1. “Notes to Condensed Consolidated Financial Statements (unaudited)” of this Quarterly Report on Form 10-Q.

ITEM 1A. RISK FACTORS

Other than set forth below, there have been no material changes to our risk factors as previously disclosed in Part I, Item 1A. included in our Annual Report on Form 10-K for the year ended December 31, 2021.

We are subject to credit risk and other risks associated with our accounts receivable securitization facility (the “A/R Facility”).

We entered into the A/R Facility with Norddeutsche Landesbank Girozentrale (“NLG”) in June 2022 that permits borrowings of up to $15.0 million outstanding from time to time through June 2025 against our existing and future account receivables. As of September 30, 2022, there were no outstanding obligations under the A/R Facility.

The amounts available under the A/R Facility depend on the size of our accounts receivable. If these amounts are less than we forecast, this could negatively affect our expected borrowing capacity and our ability to satisfy any obligations as they become due.

The willingness of NLG to make advances to us is subject to customary conditions for financings of this nature. If we are unable to satisfy those conditions, NLG could refrain from providing financing to us, and we may experience a material and adverse loss of liquidity. The A/R Facility contains representations and warranties, affirmative and negative covenants, and events of default that are customary for financings of this type. If we breach certain of our debt covenants under the A/R Facility, we will be unable to utilize the full borrowing capacity under the A/R Facility and our lenders could require us to repay the debt immediately and could immediately take possession of the receivables securing such debt. In addition, because our Senior Notes and A/R Facility contain cross-default and cross-acceleration provisions with other debt, if any debtholder were to declare its loan due and payable as a result of a default, the holders of the Senior Notes or NLG, might be able to require us to pay those debts immediately.

If NLG terminates the A/R Facility, we may experience a material and adverse loss of our liquidity, which could have a material adverse effect on financial, results of operations and cash flows.

Due to the global nature of our operations, political or economic changes or other factors in a specific country or region could harm our operating results and financial condition.

We conduct significant sales and customer support operations in countries around the world. As such, our growth depends in part on our increasing sales into emerging countries. We also depend on, and many of our customers depend on, non-U.S. operations of our contract manufacturers, component suppliers and distribution partners. Emerging countries in the aggregate experienced a decline in orders during fiscal 2021 and certain prior periods. We continue to assess the sustainability of any improvements in these countries and there can be no assurance that our investments in these countries will be successful. Our future results could be materially adversely affected by a variety of political, economic or other factors relating to our operations inside and outside the United States, including impacts from global central bank monetary policy; issues related to the political relationship between the United States and other countries that can affect the willingness of customers in those countries to purchase products from companies headquartered in the United States; business interruptions resulting from regional or larger scale conflicts or geo-political actions; the impact of the COVID-19 or other public health epidemics or concerns on our customer’s component suppliers, and the challenging and inconsistent global macroeconomic environment, any

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or all of which could have a material adverse effect on our operating results and financial condition, including, among others things:

•Current or future supply chain interruptions;

•Foreign currency exchange rates;

•Political or social unrest or instability, including effects of the recent conflict between Russia and Ukraine, and the possibility of a wider European or global conflict, and global sanctions imposed in response thereto;

•Economic instability or weakness, including inflation, or natural disasters in a specific country or region, including the current economic or health challenges in China and global economic ramifications of Chinese economic difficulties;

•Environmental and trade protection measures and other legal and regulatory requirements, some of which may affect our ability to import our products, to export our products from, or sell our products in various countries;

•Political considerations that affect service provider and government spending patterns;

•Health or similar issues and the responses thereto, such as a pandemic or epidemic, including the COVID-19 pandemic and responses taken thereto;

•Natural disasters, terrorism, war or other military conflict, telecommunication and electrical failures;

•Difficulties in staffing and managing international operations; or

•Adverse tax consequences, including imposition of withholding or other taxes on our global operations.

Concerns over economic recession, the COVID-19 pandemic, interest rate increases and inflation, supply chain delays and disruptions, policy priorities of the U.S. presidential administration, trade wars, unemployment, or prolonged government shutdown may contribute to increased volatility and diminished expectations for the economy and markets. Additionally, concern over geopolitical issues may also contribute to prolonged market volatility and instability. For example, the conflict between Russia and Ukraine could lead to disruption, instability and volatility in global markets and industries. The U.S. government and other governments in jurisdictions have imposed severe economic sanctions and export controls against Russia and Russian interests, have removed Russia from the Society for Worldwide Interbank Financial Telecommunication system, and have threatened additional sanctions and controls. The impact of these measures, as well as potential responses to them by Russia, is unknown.

We must recruit and retain our key management and other key personnel and our failure to recruit and retain qualified employees could have a negative impact on our business.

We believe that our success depends in part on the continued contributions of our senior management and other key personnel to generate business and execute programs successfully. In addition, the relationships and reputation that these individuals have established and maintain with our customers and within the industries in which we operate contribute to our ability to maintain good relations with our customers and others within those industries. The loss of any members of senior management or other key personnel could materially impair our ability to identify and secure new contracts and otherwise effectively manage our business. In order to attract and retain executives and other key employees in a competitive marketplace, we must provide a competitive compensation package, including cash- and equity-based compensation. If we do not obtain the stockholder approval needed to continue granting equity compensation in a competitive manner, our ability to attract, retain, and motivate executives and key employees could be weakened. Further, in the technology industry, there is substantial and continuous competition for highly skilled business, product development, technical and other personnel. We may be unable to attract or retain qualified personnel because their salaries and other compensation may increase to levels that we are unwilling or unable to provide. Competition for qualified personnel at times can be intense and as a result we may not be successful in attracting and retaining the personnel we require, which could have a material adverse effect on our ability to meet our commitments and new product delivery objectives. If we are unable to maintain or expand our direct sales capabilities, we may not be able to generate anticipated revenues. In addition, if we are unable to maintain or expand our product development capabilities, we may not be able to meet our product development goals. Further, we rely on the expertise and experience of our senior management team. Although we have employment agreements with our executive officers, none of them or any of our other management personnel is obligated to remain employed by us. The loss of services of any key management personnel could lower productive output, interrupt our strategic vision and make it more difficult to pursue our business goals successfully.

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Economic, political and market conditions can adversely affect our results of operations, financial condition and business.

Our business is influenced by a range of factors that are beyond our control and that we have no comparative advantage in forecasting. These include but are not limited to general economic and business conditions, the overall demand for cloud-based products and services, general political developments and currency exchange rate fluctuations. Economic uncertainty, including interest rate increases and inflation, may exacerbate negative trends in consumer spending and may negatively impact the businesses of certain of our customers, which may cause a reduction in their use of our platforms or increase the likelihood of defaulting on their payment obligations, and therefore cause a reduction in our revenues. These conditions and uncertainty about future economic conditions may make it challenging for us to forecast our operating results, make business decisions and identify the risks that may affect our business, financial conditions and results of operations and may result in a more competitive environment, resulting in possible pricing pressures. Our business could be affected by acts of war or other military actions, terrorism, natural disasters and the widespread outbreak of infectious diseases. Current world tensions could escalate, and this could have unpredictable consequences on the world economy and on our business.

The COVID-19 pandemic has created significant uncertainty in the global economy. The COVID-19 pandemic and health measures taken by governments and private industry in response to the pandemic, including stay-at-home orders, restrictions on business operations, and travel restrictions, have had significant negative effects on the economy, including disruptions impacting various supply chains. Continued uncertainty about the pandemic, associated economic consequences, and potential relief measures may have a long-term adverse effect on the economy, our sellers, customers, suppliers, and our business. For example, we are currently subletting some of our office space. An economic downturn or our work from home practices may cause us to need less office space than we are contractually committed to leasing and prevent us from finding subtenants for such unused office space, causing us to pay for unused office space. Rising tensions in the geopolitical climate, including effects of the recent conflict between Russia and Ukraine, and the possibility of a wider European or global conflict, and global sanctions imposed in response thereto, have created significant uncertainty in the global economy. These or any further political or governmental developments or health concerns in countries could result in social, economic and labor instability. If, as a result of such events, we experience a reduction in demand for our products, platforms or services, or the supply of products or components to our customers, our business, results of operations and financial condition may be materially and adversely affected.

We have, and in the future may be, the target of stockholder derivative complaints or other securities related legal actions that could adversely affect our results of operations and our business.

We have, and in the future may be, the target of stockholder derivative complaints or other securities related legal actions. The existence of any litigation may have an adverse effect on our reputation with referral sources and our customers themselves, which could have an adverse effect on our results of operations and financial condition. The outcome and amount of resources needed to respond to, defend or resolve lawsuits is unpredictable and may remain unknown for long periods of time. Our exposure under these matters may also include our indemnification obligations, to the extent we have any, to current and former officers and directors and, in some cases former underwriters, against losses incurred in connection with these matters, including reimbursement of legal fees and other expenses. For instance, on June 7, 2022, the SEC filed a civil action against two former members of the Company’s management team, alleging misconduct arising out of the restated transactions that took place in 2015 and 2016 investigated by the Securities and Exchange Commission (“SEC”). We may be required to indemnify these individuals in connection with such action. Although we maintain insurance for claims of this nature, our insurance coverage does not apply in all circumstances and may be denied or insufficient to cover the costs related to the class action and stockholder derivative lawsuits. In addition, future lawsuits or legal claims involving us may increase our insurance premiums, deductibles or co-insurance requirements or otherwise make it more difficult for us to maintain or obtain adequate insurance coverage on acceptable terms, if at all. Moreover, adverse publicity associated with negative developments in any such legal proceedings could decrease customer demand for our services. As a result, future lawsuits involving us, or our officers or directors, could have a material adverse effect on our business, reputation, financial condition, results of operations, liquidity and the trading price of our common stock.

Our stock price may continue to experience significant fluctuations and could subject us to litigation.

Our stock price, like that of other technology companies, continues to fluctuate greatly. Our stock price, and demand for our stock, can be affected by many factors, such as unanticipated changes in management, quarterly increases or decreases in our earnings, speculation in the investment community about our financial condition or results of operations and changes in

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revenue or earnings estimates, announcement of new services, technological developments, alliances, or acquisitions by us. Additionally, the price of our common stock may continue to fluctuate greatly in the future due to factors that are non-company specific, such as the decline in the United States and/or international economies, acts of terror against the United States or other jurisdictions where we conduct business, war or other military conflict or due to a variety of company specific factors, including quarter to quarter variations in our operating results, shortfalls in revenue, gross margin or earnings from levels projected by securities analysts and the other factors discussed in these risk factors. Concerns over economic recession, the COVID-19 pandemic, interest rate increases and inflation, supply chain delays and disruptions, policy priorities of the U.S. presidential administration, trade wars, unemployment, or prolonged government shutdown may contribute to increased volatility and diminished expectations for the economy and markets. Additionally, concern over geopolitical issues may also contribute to prolonged market volatility and instability. The U.S. government and other governments in jurisdictions have imposed severe economic sanctions and export controls against Russia and Russian interests, have removed Russia from the SWIFT system, and have threatened additional sanctions and controls. The impact of these measures, as well as potential responses to them by Russia, is unknown. In addition, if the market for technology stocks or the stock market in general experiences uneven investor confidence, the market price of our common stock could decline for reasons unrelated to our business, operating results or financial condition. Fluctuation in market price and demand for our common stock may limit or prevent investors from readily selling their shares of common stock and may otherwise negatively affect the liquidity of our common stock. Causes of volatility in the market price of our stock could subject us to securities class action litigation. We were previously, and may in the future be, the subject of lawsuits that could require us to incur substantial costs defending against those lawsuits and divert the time and attention of our management.

Changes in, or interpretations of, tax rules and regulations, could adversely affect our effective tax rates.

Global tax developments applicable to multinational businesses may have a material impact to our business, cash flow from operating activities, or financial results. International organizations such as the Organization for Economic Cooperation and Development, have published Base Erosion and Profit Shifting action plans that, if adopted by countries where we do business, could increase our tax obligations in these countries. In addition, several countries have proposed or enacted Digital Services Taxes ("DST"), many of which would apply to revenues derived from digital services. We will continue to assess the ongoing impact of these current and pending changes to global tax legislation and the impact on the Company's future financial statements upon the finalization of laws, regulations and additional guidance. In addition, as we continue to evaluate our corporate structure, any changes to the taxation of undistributed foreign earnings could also change our plans regarding reinvestment of such earnings. Due to the large scale of our U.S. and international business activities, many of these enacted and proposed changes to the taxation of our activities could increase our worldwide effective tax rate and have an adverse effect on our operating results, cash flow or financial condition.

Certain EU and other jurisdictions have introduced anti-hybrid provisions, which came into force in EU member states on January 1, 2020 (subject to relevant derogations). The scope of these rules is wide-reaching and can apply to disallow certain deductions for corporate tax purposes where hybrid entities exist within a company structure. These provisions may place additional burden on our management to assess the impact of the rules and potentially create additional tax costs. EU countries and other jurisdictions will continue to interpret or issue additional guidance on how provisions of the anti-hybrid will be applied, which, if applicable, may materially impact our financial statements and cash flow. Separately, as a result of the complexity of, and lack of clear precedent or authority with respect to, the application of various income tax laws to our corporate structure, tax authorities may challenge how we report our transactions, which may increase our costs and impact our operations.

We are subject to income taxes as well as non-income-based taxes, in both the U.S. and various foreign jurisdictions. Many judgments are required in determining our worldwide provision for income taxes and other tax liabilities, and we are under audit by various tax authorities, which often do not agree with positions taken by us on our income and non-income-based tax returns. Although we believe that our estimates are reasonable, the ultimate tax outcome may differ from the amounts recorded in our consolidated financial statements and may materially affect our financial results in the period or periods for which such determination is made. Unanticipated changes in our tax rates could affect our future results of operations. Our future effective tax rates could be unfavorably affected by changes in tax laws or the interpretation of tax laws or by changes in the valuation of our deferred tax assets and liabilities. In August 2022, the Inflation Reduction Act of 2022 (the “IRA”) was signed into law. This law, among other things, provides for a corporate alternative minimum tax on adjusted financial statement income (effective for us beginning in fiscal 2024), and an excise tax on corporate stock repurchases (effective for our share repurchases after December 31, 2022), and we are continuing to evaluate the impact it may have on our financial position and results of operations. There are several proposed changes to U.S. and non-U.S. tax legislation and the ultimate enactment of any of them

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could have a negative impact on our effective tax rate. It is possible that future requirements, including the recently proposed implementation of International Financial Reporting Standards (“IFRS”) could change our current application of U.S. GAAP, resulting in a material adverse impact on our financial position or results of operations. In addition, we are subject to the continued examination of our income tax returns by the Internal Revenue Service (“IRS”), and other tax authorities. We regularly assess the likelihood of outcomes resulting from these examinations, if any, to determine the adequacy of our provision for income taxes. We believe our estimates to be reasonable, but there can be no assurance that the final determination of any of these examinations will not have an adverse effect on our operating results and financial position.

A new 1% U.S. federal excise tax may be imposed upon us in connection with the redemptions by us of our Series B Non-Convertible Perpetual Preferred Stock (“Series B Preferred Stock”) or other redemptions or repurchases of our equity.

On August 16, 2022, President Biden signed into law the IRA, which, among other things, imposes a new U.S. federal 1% excise tax on certain repurchases (including redemptions) of stock by publicly traded domestic corporations and certain domestic subsidiaries of publicly traded foreign corporations. This excise tax is imposed on the repurchasing corporation itself, not its stockholders from which shares are repurchased. Generally, the amount of the excise tax is 1% of the fair market value of the shares repurchased at the time of the repurchase. For the purposes of calculating the excise tax, the repurchasing corporation is permitted to net the fair market value of certain new stock issuances against the fair market value of the stock repurchases that occur in the same taxable year. The U.S. Treasury Department, the IRS, and other standard-setting bodies are expected to issue guidance on how the excise tax provisions of the IRA will be applied. The IRA excise tax applies to repurchases and redemptions that occur after December 31, 2022.

Pursuant to the Certificate of Designation setting forth the rights, preferences, privileges, qualifications, restrictions and limitations on the Series B Preferred Stock (the “Series B Certificate”), on and after the fifth anniversary of the date of issuance, holders of shares of Series B Preferred Stock will have the right to cause us to redeem each share of Series B Preferred Stock for cash in an amount equal to the sum of the current liquidation preference and any accrued dividends. Each share of Series B Preferred Stock will also be redeemable at the option of the holder upon the occurrence of a “Fundamental Change” at (i) par in the case of a payment in cash or (ii) 1.5 times par in the case of payment in shares of Common Stock, subject to certain limitations on the amount of stock that could be issued to the holders of Series B Preferred Stock. In addition, we are permitted to redeem outstanding shares of the Series B Preferred Stock at any time for the sum of the then-applicable Liquidation Preference and the accrued but unpaid dividends. Pursuant to the Series B Certificate, we will be required to use (i) the first $50.0 million of proceeds from certain transactions (i.e., disposition, sale of assets, tax refunds) received by the Company to redeem for cash, shares of the Series B Preferred Stock, on a pro rata basis among each holder of Series B Preferred Stock and (ii) the next $25.0 million of proceeds from certain transactions received by us may be used by us to buy back shares of Common Stock and to the extent, not used for such purpose, to redeem, for cash, shares of the Series B Preferred Stock, on a pro rata basis among each holder of the Series B Preferred Stock.

We currently expect that each redemption of Series B Preferred Stock after December 31, 2022 will be subject to the 1% excise tax. Whether and to what extent we would be subject to the excise tax would depend on a number of factors, including (i) the fair market value of the redemptions and repurchase, (ii) the nature and amount of any equity issuances within the same taxable year and (iii) the regulations and other guidance issued by the U.S. Treasury Department and the IRS. The 1% excise tax may increase our costs and impact our operations. This could have an adverse effect on our margins and financial position and would negatively affect our revenues and results of operations and/or trading price of our common stock.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

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ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS

Incorporated by Reference

Exhibit No.

Description

Form

File No.

Exhibit

Filing Date

Filed Herewith

3.1

Restated Certificate of Incorporation of the Registrant.

S-1

333-132080

3.2

May 9, 2006

3.2

Certificate of Amendment to the Restated Certificate of Incorporation of the Registrant.

8-K

001-40574

3.1

June 23, 2022

3.3

Amended and Restated Bylaws of the Registrant.

S-1

333-132080

3.4

May 9, 2006

3.4

Amendment No. 1 to Amended and Restated Bylaws of the Registrant.

8-K

000-52049

3.2

February 20, 2018

3.5

Amendment No. 2 to the Amended and Restated Bylaws of the Registrant.

8-K

000-52049

3.3

June 30, 2021

3.6

Certificate of Designations of the Series B Perpetual Non-Convertible Preferred Stock.

8-K

000-52049

3.1

June 30, 2021

10.1

Appointment Letter, dated August 9, 2022 between the Registrant and Lou Ferraro.

8-K

001-40574

10.1

August 9, 2022

10.2

Amendment to Employment Agreement, dated August 9, 2022 between the Registrant and Taylor Greenwald.

8-K

001-40574

10.2

August 9, 2022

31.1

Certification of Principal Executive Officer pursuant to Rule 13a‑14(a) of the Exchange Act, as adopted pursuant to section 302 of the Sarbanes‑Oxley Act of 2002.

31.2

Certification of Principal Financial Officer pursuant to Rule 13a‑14(a) of the Exchange Act, as adopted pursuant to section 302 of the Sarbanes‑Oxley Act of 2002.

32.1

Certification of Principal Executive Officer pursuant to Rule 13a‑14(b) of the Exchange Act and section 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes‑Oxley Act of 2002.

32.2

Certification of Principal Financial Officer pursuant to Rule 13a‑14(b) of the Exchange Act and section 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes‑Oxley Act of 2002.

101.INS

XBRL Instance Document

101.SCH

XBRL Schema Document

101.CAL

XBRL Calculation Linkbase Document

101.DEF

XBRL Taxonomy Extension Definition Linkbase

101.LAB

XBRL Labels Linkbase Document

101.PRE

XBRL Presentation Linkbase Document

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SIGNATURES

Pursuant to the requirements of Securities Exchange Act of 1934, the registrant has caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.


						Synchronoss Technologies, Inc.



						/s/ Jeff Miller
						Jeff Miller
						Chief Executive Officer
						(Principal Executive Officer)


						/s/ Louis Ferraro
						Louis Ferraro
						Chief Financial Officer

November 8, 2022