Image: Synchronoss Technologies.
The connectivity that mobile devices have brought to the world has revolutionized the way that people interact, and companies seeking to make the user experience better for mobile customers have seen plenty of growth opportunities. Synchronoss Technologies (SNCR -0.47%) has done a good job of finding ways to use cloud resources to offer new capabilities to mobile customers and to the carriers that serve them. Coming into its third-quarter financial report on Wednesday, Synchronoss investors wanted to see continued strong growth to allay concerns about a potential slowdown. The company's results didn't top expectations in the way that investors have gotten used to seeing from Synchronoss, but they still suggested that it has opportunities to capitalize on for the future. Let's look more closely at how Synchronoss Technologies did this quarter and what's ahead for the company.
Synchronoss climbs through a milestone
Synchronoss Technologies' third-quarter results showed similar growth rates to what long-term investors have gotten used to seeing. Adjusted revenue rose 21% to $151.3 million, which fell short of the consensus forecast among those following the stock by less than $1 million. Adjusted net income climbed an even more impressive 35% to $27.1 million, producing adjusted earnings of $0.58 per share, matching what investors had expected from Synchronoss this quarter.
As we've seen in past quarters, Synchronoss relied to a much greater extent on its fast-growing cloud computing business. Cloud services revenue jumped 31% from the year-ago quarter, and Synchronoss once again got more than half of its overall sales from cloud-based sources. Activation services still performed well, but its 11% growth rate shows how the company's priorities have had to change as it considers its best strategic course going forward.
CEO Stephen Waldis celebrated a sales milestone for the company, citing Synchronoss' $600 million annualized revenue run rate. "Adoption of our cloud and activation platforms continues to grow globally," Waldis said, "and we recently introduced powerful new predicative analytic capabilities." In addition, Synchronoss has launched new initiatives to try to capture even bigger business opportunities down the road.
Can Synchronoss keep expanding?
Specifically, Synchronoss talked about two opportunities. First, it announced the launch of its enterprise business, which Synchronoss plans to use to offer secure mobility solutions to enterprise clients. Given the need for corporate tech support in handling mobile devices, the move makes plenty of sense, and Synchronoss will initially focus on the financial, healthcare, and life sciences industries to assess prospects.
In addition, Synchronoss said that it is working with Goldman Sachs (GS -0.20%) in a new venture that will develop advanced mobile solutions based on proprietary secure mobility technology. Goldman Sachs has a strong reputation for developing and using new technology throughout its business, and the company has historically responded by making it easier for its employees to connect remotely on a wide variety of mobile devices. By using the intellectual property that Goldman Sachs provides to the venture, Synchronoss hopes that it will be able to extend valuable mobile security products to support the new enterprise business.
Overall, Synchronoss will need to find ways to balance innovation with providing reliable service to its existing customer base. The company doesn't see any obstacles to success on this front, with CFO Karen Rosenberger noting that "we are confident that our strategic customer relationships, combined with our growth investments and expansion into new market opportunities, position us well to scale Synchronoss to the next level."
Despite the positive tone of its quarterly report, Synchronoss investors didn't like the fact that the company didn't give them the usual consensus-beating results from a financial perspective, sending the stock down sharply following the announcement. Nevertheless, if things go as well as Synchronoss expects them to go, then any further pullback in the stock could seem like a bargain opportunity in hindsight.
