Synchronoss outlines $169M–$172M 2025 revenue guidance amid subscriber headwinds and AI-driven growth initiatives

Earnings Call Insights: Synchronoss Technologies (SNCR) Q3 2025

MANAGEMENT VIEW

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CEO Jeffrey Miller opened by noting that third-quarter revenue was slightly below expectations due to subscriber growth weakness among certain customers and delayed timing of new contracts. Miller highlighted profitability performance, including net income of $5.8 million and diluted earnings per share of $0.51. He stated, "The sustained growth of our cloud-based business model was evident with recurring revenue representing more than 93% of total revenue. Our disciplined execution of key initiatives across the organization continues to enhance the company's financial strength and supports sustained progress in the profitability of our more predictable and stable business model."

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Miller detailed the company's capital structure improvement, referencing a $200 million 4-year term loan refinancing, retirement of senior notes, and receipt of a $33.9 million CARES Act refund. He said, "This long-awaited refund enabled us to make a $25.4 million prepayment at par on our term loan, adding to the total of $100 million of debt reduction over the past 4 years."

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Miller discussed customer relationships, stating, "At AT&T, we continue to see positive momentum in subscriber growth... We're still less than 2% penetrated within the total subscriber base of AT&T and growing ahead of our expectations, leaving a long runway for continued growth in 2026 and beyond." He noted ongoing subscriber transitions at Verizon and new digital integration with SoftBank, as well as Capsyl's momentum with Telkomsel.

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Miller highlighted ongoing AI-driven transformation, including the deployment of hybrid cloud AI models and enhanced content intelligence features. He said, "Our enhanced platform capabilities, large global cloud subscriber base and talented software development teams are creating a recipe to introduce capabilities and offerings to drive revenue and complement the expansion of our current cloud customer base."

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CFO Lou Ferraro stated, "Quarterly recurring revenue was 93.8% of total revenue, reflecting our stable cloud business model, which was driven by cloud subscriber growth of approximately 1%." Ferraro added, "Income from operations was up 6.4% year-over-year from $5.5 million to $5.9 million, driven by further reductions in operating expenses."

OUTLOOK

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Management adjusted full-year 2025 revenue guidance to between $169 million and $172 million, with adjusted EBITDA guidance of $50 million to $53 million and free cash flow of $6 million to $10 million. Miller explained, "With anticipated continuation of subscriber headwinds among some customers in the fourth quarter and anticipated revenue contributions from new customer contracts, we're adjusting our full year revenue guidance to be between $169 million and $172 million."

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Adjusted gross margin is expected to remain between 78% and 80%, and recurring revenue is projected to be at least 90% of total revenue.

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Miller described the subscriber growth softness as temporary, noting, "We're building momentum across multiple fronts that we believe will drive improved performance in 2026."

FINANCIAL RESULTS

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Total revenue for Q3 was $42 million, with recurring revenue at 93.8% of total. Adjusted gross profit was $33.4 million or 79.5% of total revenue. Income from operations was $5.9 million. Adjusted EBITDA was $12 million, representing a 28.5% margin.

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Operating expenses decreased 3.5% year-over-year to $36.1 million. Net income was $5.8 million, including a $5.2 million one-time interest income event from the tax refund. Cash and cash equivalents stood at $34.8 million, and net debt was $139.8 million.

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Free cash flow for the quarter was $36 million, largely due to the tax refund, and adjusted free cash flow was $4.2 million.

Q&A

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Anja Soderstrom, Sidoti & Company, LLC: Asked whether growth was mainly driven by higher wallet share rather than subscriber growth and how overall growth should be considered when subscriber growth returns. Miller responded that there was slight growth in subscriber revenue and that long sales cycles with new customer contracts were impacting results. He said the company is aiming for mid-single-digit subscriber growth complemented by new customers in 2026.

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Soderstrom asked about the pipeline beyond two important customers. Miller explained, "The pipeline for other customers both looks good for, I'll call it, branded clouds... but also for our Capsyl. And we have those opportunities in the United States, in Asia, in Europe and even other parts of the world."

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Soderstrom inquired about capital allocation priorities given improved cash flow. Ferraro said the focus is on product investment and potential inorganic growth before considering share buybacks.

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Jon Hickman, Ladenburg Thalmann: Sought clarification on interest income and expense. Ferraro explained that $1.7 million was a one-time deferred issuance cost, and $5.2 million was interest income from the tax refund.

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Hickman asked about the sequential decline in subscriber growth and revenue. Miller stated, "We went from 3% subscriber growth, I believe, as we reported last quarter to 1% this quarter, impacted by some of the things I had described." He attributed sequential revenue decline to fewer one-time license or services fees compared to Q2.

SENTIMENT ANALYSIS

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Analysts adopted a neutral to slightly cautious tone, probing subscriber growth, pipeline prospects, and expense items. Questions focused on growth drivers and the sustainability of improvements.

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Management maintained a confident and disciplined tone in both prepared remarks and responses, emphasizing operational execution, cost control, and future growth opportunities. Miller's statements such as, "We remain confident in our strategy, our market position and our ability to drive long-term value for shareholders," reflected this confidence.

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The previous quarter's sentiment was slightly more optimistic, with stronger subscriber growth and higher recurring revenue. The current quarter reflects more caution due to lower-than-expected subscriber growth and revenue.

QUARTER-OVER-QUARTER COMPARISON

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Revenue guidance was lowered to $169 million–$172 million from $170 million–$180 million in Q2. Adjusted EBITDA guidance was reduced to $50 million–$53 million from $52 million–$56 million, and free cash flow guidance was cut to $6 million–$10 million from $11 million–$16 million.

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Recurring revenue increased as a share of total revenue (from 92.6% in Q2 to 93.8% in Q3), while subscriber growth slowed from 3% sequentially to 1% year-over-year.

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Management's tone shifted from confident and optimistic in Q2 to more cautious in Q3, citing subscriber growth challenges and delayed new contracts. Analysts focused on the same areas, with increased questions about sequential trends and capital allocation.

RISKS AND CONCERNS

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Management cited subscriber growth weakness and delayed timing of new customer contracts as primary challenges.

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There was mention of ongoing subscriber transitions at key customers (notably Verizon) and the risk of continued revenue headwinds if new customer launches are further delayed.

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Management highlighted mitigation strategies including cost discipline, capital structure improvements, and investments in AI-driven product enhancements and expanded customer opportunities.

FINAL TAKEAWAY

Synchronoss Technologies acknowledged that third-quarter revenue and subscriber growth were below expectations, prompting a reduction in full-year 2025 guidance for revenue, adjusted EBITDA, and free cash flow. The company emphasized disciplined cost management, a robust recurring revenue base, and a strengthened balance sheet, while highlighting ongoing investments in AI-driven product innovation and new customer acquisitions. Management expressed confidence that these initiatives, combined with operational flexibility and expanding customer relationships, will support improved performance and growth prospects in 2026 and beyond.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/sncr/earnings/transcripts]

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