Shares of cloud-based software provider Synchronoss Technologies (NASDAQ:SNCR) slumped on Wednesday after the company disclosed in a filing with the U.S. Securities and Exchange Commission that the audit committee of the board of directors had concluded that its financial statements for 2015 and 2016 should be restated. Synchronoss stock was down 10% at 11:45 a.m.
On April 27, Synchronoss announced that its first-quarter results would fall well short of its previous guidance. The company also announced that CEO Ronald Hovsepian, who was CEO of Intralinks before it was acquired by Synchronoss, and CFO John Frederick were stepping down, with founder Stephen Waldis taking over as CEO.
On May 15, Synchronoss announced that it was delaying its first-quarter earnings report because management needed more time to comply with internal controls and to review certain aspects of the company's financial statements. Synchronoss didn't identify the Intralinks acquisition as a transaction that the audit committee was reviewing, but the timing of Hovsepian's departure is unlikely to be a coincidence.
The result of the review, as disclosed in Wednesday's filing, was the discovery of errors concerning revenue recognition in connection with certain licensing transactions. The company expects the revenue impact of the correction of these errors for 2015 and 2016 to be no more than 10%. The corrections aren't expected to impact cash flows or result in customer refunds.
Synchronoss didn't provide a date on which it plans to file restated financial statements for 2015 and 2016, and issue its first-quarter report, only saying that these items would be filed as soon as practicable. It's unclear at this time what role the Intralinks acquisition plays in these restatements.
Shares of Synchronoss are now down about 78% over the past year, battered in the wake of these revelations. Investors are showing no patience for accounting shenanigans.