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ST

SYNCHRONOSS TECHNOLOGIES INC (SNCR)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 revenue was $42.0M with 93.8% recurring, while diluted GAAP EPS was $0.51; non-GAAP diluted EPS was $0.63, supported by a $5.2M one-time interest income from the IRS CARES Act refund .
  • Versus consensus, EPS beat and revenue missed: EPS $0.63 vs $0.57*, Revenue $42.0M vs $43.2M*; adjusted EBITDA was $12.0M vs consensus $13.3M*, reflecting definition differences and revenue softness at certain customers .
  • Guidance lowered: FY25 revenue to $169–$172M (from $170–$180M), adjusted EBITDA to $50–$53M (from $52–$56M), and FCF to $6–$10M (from $11–$16M); adjusted gross margin (78–80%) and recurring revenue (≥90%) maintained .
  • Catalysts: management reiterated “high confidence” in adding one new cloud customer in 2025 and an additional Tier 1 in H1’26; hybrid-cloud AI deployment and debt reduction improving strategic flexibility .

What Went Well and What Went Wrong

What Went Well

  • High-quality revenue mix and profitability resilience: recurring revenue was 93.8% and adjusted EBITDA margin 28.5%, showcasing the stability of the SaaS model even with revenue headwinds .
  • Strategic progress with major carriers: “strong subscriber growth at AT&T,” initiatives at Verizon to position cloud as a premium perk, and SoftBank SDK integration to broaden digital discoverability .
  • AI-driven cost optimization and feature roadmap: “successfully completed and deployed a hybrid cloud AI model for advanced content intelligence,” enabling in-house photo tagging and embeddings across private/public clouds; foundational for “new memories feature” and engagement .

What Went Wrong

  • Top-line softness: revenue of $42.0M declined YoY due to delayed customer signings and subscriber growth weakness at some customers; cloud subscriber growth slowed to ~1% YoY vs 2–3% earlier in the year .
  • Sequential revenue pressure: fewer one-time license/professional services in Q3 versus Q2 (SoftBank SDK license impacted Q2), despite slight subscription growth Q3 over Q2 .
  • Guidance cut: FY25 revenue, adjusted EBITDA, and FCF lowered, reflecting subscriber headwinds and timing of new customer contributions; consensus EBITDA also above company’s adjusted EBITDA in Q3, signaling external expectations may have been ahead .

Financial Results

Core P&L and EPS vs prior periods

MetricQ1 2025Q2 2025Q3 2025
Revenue ($USD Millions)$42.213 $42.486 $42.003
Diluted EPS (GAAP) ($)$(0.37) $(1.87) $0.51
Diluted EPS (Non-GAAP) ($)$(0.30) $0.10 $0.63

Margins and Profitability

MetricQ1 2025Q2 2025Q3 2025
Gross Margin (GAAP)70.4% 69.3% 69.4%
Adjusted Gross Margin (%)79.0% 79.3% 79.5%
Adjusted EBITDA ($USD Millions)$12.745 $12.817 $11.982
Adjusted EBITDA Margin (%)30.2% 30.2% 28.5%

KPIs and Cash Flow

MetricQ1 2025Q2 2025Q3 2025
Recurring Revenue (%)93.1% 92.6% 93.8%
Cloud Subscriber Growth (YoY)3.3% 2.0% ~1%
Free Cash Flow ($USD Millions)$(3.017) $(1.090) $35.860
Adjusted Free Cash Flow ($USD Millions)$(3.639) $0.534 $4.180
Cash & Cash Equivalents ($USD Millions)$29.138 $24.622 $34.827

Segment Breakdown

SegmentQ1 2025Q2 2025Q3 2025
Segment detailNot disclosed in filings Not disclosed in filings Not disclosed in filings

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Millions)FY 2025$170–$180 $169–$172 Lowered
Recurring Revenue (%)FY 2025≥90% ≥90% Maintained
Adjusted Gross Margin (%)FY 202578–80 78–80 Maintained
Adjusted EBITDA ($USD Millions)FY 2025$52–$56 $50–$53 Lowered
Free Cash Flow ($USD Millions)FY 2025$11–$16 (excl. tax refund and $4.4M fees) $6–$10 (excl. tax refund and $4.4M fees) Lowered

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
AI/technology initiativesQ2: Personal Cloud v25.5, Genius AI enhancements; privacy certifications (EU-US DPF, SOC2, ISO 27001) Hybrid-cloud AI model for content intelligence; in-house photo tagging/embeddings; groundwork for “memories” and personalized content Accelerating deployment and cost optimization
Macro/tariffs/device cyclesQ2: Carriers prioritizing value-added services amid elongated upgrade cycles; macro uncertainties incl. tariffs Acknowledged “economic environment” changes; subscriber growth weakness at certain customers Ongoing headwinds; VAS focus persists
AT&T performanceQ2: Sustained momentum, enhanced digital onboarding; Samsung flagship tailwind “Strong subscriber growth”; <2% penetration implies runway Improving adoption; long runway
Verizon performanceQ2: Cloud positioned within MyPlan/MyHome/MyBiz; expanding retail activations Transition to MyPlan Perks creating near-term pressure; initiatives to boost retail channel uptake; SMB/value segments traction Mixed near-term; improving channels
SoftBank integrationQ2: Signed SDK integration into native app Development kicked off; expect digital channel contribution in 2026 Execution in progress
New customers/pipelineQ2: On track to sign ≥1 customer in 2025 Reiterated new customer in 2025 and Tier 1 in H1’26; deep contracting phase Building toward launches
Capital structure/FCFQ1/Q2: $200M term loan; $33.9M CARES refund; $25.4M paydown; lower interest Net debt 2.7x FY25 adj. EBITDA; annual interest −$2.8M; FCF inflated by refund; adjusted FCF used for core view Stronger flexibility; adjusted FCF focus

Management Commentary

  • CEO: “We demonstrated the strength of our SaaS powered cloud model, generating $42 million in revenue with 93.8% being recurring, net income of $5.8 million resulting in diluted EPS of $0.51, and $12.0 million adjusted EBITDA… We have high confidence in adding at least one new cloud customer in 2025 and a new tier 1 customer in the first half of 2026” .
  • CEO on customers: “Strong subscriber growth at AT&T… initiatives to accelerate growth at Verizon… advancing cloud application discovery integrations at SoftBank” .
  • CFO: “Net income was $5,800,000 or $0.51 per diluted share. This result was driven by a $5,200,000 one-time interest income event from our tax refund… Adjusted EBITDA was $12,000,000 representing a 28.5 margin” .
  • Technology: “Successfully completed and deployed a hybrid cloud AI model for advanced content intelligence… foundational pillar for next generation features… personalized Genius style content” .

Q&A Highlights

  • Growth drivers and pipeline: Subscriber growth slowed to ~1% YoY; management expects mid-single-digit subscriber growth as initiatives and new customer contracts ramp in 2026 .
  • Capital allocation: With added cash from the refund, priorities are product investment, platform expansion, and potential inorganic opportunities before buybacks .
  • Interest itemization: ~$1.7M deferred issuance costs impacted interest expense; $5.2M interest related to the CARES refund inflated Q3 interest income .
  • Sequential revenue: Q3 down vs Q2 due to fewer one-time license/professional services (SoftBank SDK license boosted Q2); subscription growth slightly up Q3 over Q2 .

Estimates Context

MetricConsensus (Q3 2025)Actual (Q3 2025)Surprise
Primary EPS ($)$0.57*$0.63 Beat
Revenue ($USD)$43.1967M*$42.003M Miss
EBITDA ($USD)$13.2933M*$11.982M (Adj. EBITDA) Miss (note: definition likely differs)

Values retrieved from S&P Global*. Consensus EBITDA may reflect a different definition than company-reported adjusted EBITDA. The EPS “actual” from consensus aligns with non-GAAP diluted EPS reported by the company .

Key Takeaways for Investors

  • Mix quality remains high (recurring 93.8%), but near-term revenue softness and slower subscriber growth at some customers weighed on Q3 and drove FY25 guidance cuts .
  • The EPS beat was aided by one-time interest income from the IRS refund; core profitability (adj. EBITDA margin 28.5%) remains resilient amid cost control .
  • Execution on Verizon channel optimization and SoftBank SDK integration is key to reigniting subscriber growth; AT&T remains a bright spot with <2% penetration .
  • Balance sheet improved: net debt ~2.7x FY25 adj. EBITDA and annual interest down by ~$2.8M, enhancing investment optionality into product and potential M&A .
  • Watch for new customer announcements (≥1 in 2025 and a Tier 1 in H1’26) as primary stock catalysts; narrative turning toward 2026 growth reacceleration .
  • Estimates may drift lower given guidance revisions; pay attention to EBITDA definition alignment when benchmarking to consensus .
  • Short-term: trade around customer signings and channel data at Verizon; Medium-term: thesis rests on execution of AI-driven engagement features and broader digital integrations to lift take-rates and subscriber growth .