Cloud computing has captured the imagination of tech experts and investors alike, and the efficiency gains from sharing vast IT resources rather than having to duplicate site-specific technology infrastructure has led to a revolution in computing capabilities. Synchronoss Technologies (NASDAQ:SNCR) has capitalized on the demand for cloud-based solutions, with a particular emphasis on making mobile technology more productive for users and carriers alike. Coming into its second-quarter financial report Wednesday morning, Synchronoss investors were hoping for new signs that growth would remain at attractive levels, and the company's results largely confirmed the bullish thesis for investors. Let's take a closer look at Synchronoss Technologies and what its future might hold for its customers and its shareholders.
Synchronoss sees sunny skies in the cloud
Synchronoss Technologies' second-quarter results remained consistently solid, continuing the growth trends that we've seen in past quarters. Sales climbed 33% to $137.8 million, which essentially met the expectations of investors following the company. On the bottom line, Synchronoss grew even faster than most investors were looking to see, with a 55% rise in net income to $26 mllion working out to adjusted earnings of $0.56 per share, a nickel ahead of the consensus estimate.
Looking more deeply into Synchronoss' numbers, you can see again the divide between the company's two core businesses. Cloud-services revenue jumped 54% from the year-ago quarter, and the $71.9 million in total sales from the division now brings in well over half the company's total revenue. Meanwhile, in the activation services segment, revenue growth of 16% was still reasonably strong and actually accelerated from its pace in the first quarter of 2015, but it's clear that the cloud holds the greater opportunity for Synchronoss going forward.
CEO Stephen Waldis shared this general view of the company, noting that it exceeded or met expectations in its key business metrics. "Each of our businesses performed well," Waldis said, "and we were pleased to see some of our new wins begin to scale and drive volumes, particularly on the cloud side." Waldis called out the success Synchronoss has had in appealing to international mobile operators, who he said "are increasingly realizing the significant value Synchronoss' white-label cloud solution can deliver to their subscribers."
What's next for Synchronoss?
Moreover, Synchronoss sees no immediate obstacles to continuing its impressive growth trend. As CFO Karen Rosenberger said, "We continue to execute at a high level, which is resulting in strong growth across both our cloud and activation services revenue, and we believe we are well positioned to maintain our strong momentum on a global basis." Those comments are consistent with Synchronoss' past growth trajectory, and as more customers start to see the value of its services, Synchronoss could enjoy positive network effects that will only accelerate growth.
International expansion has been a key strategic element of Synchronoss' growth plans. Earlier this month, the company said that it was set to launch its personal cloud and network activation services business within Vietnam. Synchronoss identified the Southeast Asian nation as an area of high growth, with large numbers of subscribers upgrading from old-style handsets to smartphones and therefore requiring increasing amounts of mobile data. In particular, in areas where a lack of fixed-line telecommunications service has made mobile the only viable method of building a telecom network, Synchronoss has a huge opportunity to help mobile users manage their content and data across platforms to ensure continuous access and updating.
Synchronoss stock gained ground on the news, rising by about 1% in the first half-hour of the regular trading session following the morning earnings announcement. Synchronoss still has a long way to go before it reaches its full potential, but this quarter represents another positive step on the road toward a bigger role for the company in the global telecom and cloud-computing arena.