Synchronoss Technologies Inc (SNCR) 2008 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the second quarter 2008 Synchronoss Technologies Incorporated earnings conference call. My name is Carissa, and I will be your coordinator for today. At this time all participants are in listen-only mode. We will be facilitating a question-and-answer session towards the end of this call. (OPERATOR INSTRUCTIONS).

I would now like to turn the presentation over to your host for today's call, Mr. Lawrence Irving, Chief Financial Advisor. Please proceed.

Thank you, Carissa. Good afternoon and welcome to the Synchronoss Second Quarter 2008 Earnings Conference Call. We will be discussing the results announced in the press release issued after the market close today. Again, I am Larry Irving, Chief Financial Officer of Synchronoss Technologies. With me on the call is Steve Waldis, President and CEO.

During this call, we will make statements related to our business that may be considered forward-looking statements under federal securities laws. These statements reflect our views only as of today and should not be reflected upon as representing our views as of any subsequent date. These statements reflect our current views regarding the future and are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations.

For discussion on the material risks and other important factors that could affect our actual results, please refer to our SEC filings. With that, I'll turn the call over to Steve and then I'll come back a bit later to provide some further details regarding our financials and our forward outlook. Steve?

Thank you, Larry. Good afternoon and thank you for joining us on our call to review our second quarter results. From a summary perspective the Company's performance in the quarter was in line with our expectations. As discussed on previous calls, our reported revenues in the second quarter and first half of 2008 were materially impacted by reduced transactions associated with the Apple iPhone. At this stage we have moved forward as a company. We are confident that the expansion of our core AT&T relationship as well as increased activity with other converged services customers will return Synchronoss to solid sequential revenue growth in both the upcoming third and fourth quarters.

That said, we have widened our range for growth expectations in the second half of the year as we have a number of new customers and programs in the process of being launched. And as we mentioned on the last call, there are many factors that impact the timing of initial ramp of new customers. We continue to expect strong profitability consistent with the outlook shared on last quarter's call.

Longer term, we expect continued growth in our core AT&T business as well as an increasingly diversified revenue base as our business scales with cable MSOs, wireless services, handsets and Voice over IP service providers. We believe we're still in the early stages of a very large market opportunity in the global communication service providers as they increase deployed converged services and as they increase the use of their Internet and mobile devices for sales, service and content delivery. Synchronoss is well positioned to capitalize on this opportunity on our proven value proposition, strong technology platform and our Tier 1 customer base and domain expertise.

Now let me provide a summary review of our second quarter financial performance followed by an update on our key business development activities. Starting with the second quarter results, we reported revenues of $24.3 million that was in line with our guidance. From a profitability perspective, we generated a non-GAAP operating margin of 22% leading to a non-GAAP EPS of $0.11 which was also consistent with our guidance. We ended the quarter with a very strong balance sheet. Our cash balance sheet was approximately $95 million with no debt, and we've generated $9.5 million in cash flows from operations through the first six months of 2008.

Now turning to our business operations and beginning with AT&T who continues to be our largest business partner. Last quarter we previewed that we expect materially lower volumes associated with the Apple iPhone during 2008, but we were precluded at that time from discussing the specific reasons due to our NDAs. Subsequent to that call on June 9 AT&T and Apple announced that they were changing the activation process for the 3G iPhone, reverting to AT&T's manual retail store activation process for consumer-related transactions. In the history of our overall relationship with AT&T, Synchronoss has never been part of the activation process for transaction types that always require manual intervention as it reduces the economic benefit of our platform. To be clear, this change was not a reflection in any way of the quality of service or the end-user experience relative to the activation process that Synchronoss enabled for the 2G iPhone. Rather, as AT&T has stated it was a decision by AT&T in an attempt to eliminate the unlocking of iPhones. We strongly believe that we enable the highest quality and most scalable activation process in the industry, allowing for hundreds of thousands of activations to happen in the matter of a few minutes in the comfort of the customer's home or office.

We will continue to provide activation services related to the 2G iPhone as we have since launch. And in addition we will continue to support the activation process of enterprise customers related to 3G iPhone transactions as they occur through traditional e-commerce channels that Synchronoss has managed preceding the introduction of the iPhone itself.

However, as I stated at the outset while we were disappointed in the decision to change what was a successful and wildly popular activation process with end users, we have turned the page as a company and are focusing on executing our long-term growth plan with AT&T and a growing list of other Tier 1 communication service providers.

During the second quarter our core AT&T revenue, those that exclude the iPhone, grew 8% on a year-over-year basis, and we currently expect our business with core AT&T to generate mid-teens revenue growth for Synchronoss during 2008 as we continue to execute against existing programs as well as some new initiatives that are in the early stages of being launched and planned.

In particular on recent calls we shared that we are excited about an opportunity to expand our platform to handle more transactions across multiple lines of networks services via AT&T e-commerce. I'm pleased to share with you that during the second quarter we began to work on this initiative. The current plan is for our ConvergenceNow platform to manage consumer transactions including all wireline services that are offered from AT&T and order online via AT&T e-commerce starting in the fourth quarter of 2008. Once implemented, a customer will be able to order, buy and receive converged services with an outstanding customer experience.

And as another sign of our expanding relationship with AT&T, we also signed a new multi-year agreement with AT&T to support a whole new range of transactions associated with IP-based services for managing the end-to-end customer experience. Now, due to our NDA requirements we cannot at this time discuss specific details around this new set of transactions, but we believe we will set the industry for managing the customer experience for these IP services no different than what we believe we've done in the area of mobile devices. We expect to begin generating some revenue related to this initiative in 2008, but based on current plans we believe the relationship will ramp more meaningfully in 2009 and beyond as AT&T scales the specific engagement.

The bottom line is that we continue to enjoy a strong working relationship with AT&T based on the business value that we deliver, and we look forward to continuing to expand our relationship for many years.

We are also very excited about our relationship with Brightpoint which we announced last quarter, and our recent announcement of Nokia USA which is the first joint customer of the strategic relationship. As part of this relationship, the Synchronoss platform will now be managing Nokia USA's online handset activation process. When fully implemented, customers will visit Nokia's website, and our platform will make it easy for them to pick the device they want from the carrier they choose as well as the service plan that best meets their needs, all with a simple click of the mouse. And Brightpoint and Synchronoss will ensure that the consumer enjoys a highly automated and superior customer experience all from the comfort of their home. Our combined services and capabilities will enable consumers to order online today, have their phone delivered tomorrow exactly as they ordered it, shipped hot and ready for use when they open the package.

This relationship is important for several reasons. First, it's another example of Synchronoss enabling a world-class customer experience for a handset provider. Secondly, it's our first joint customer with Brightpoint, and we believe our compelling value proposition will be attractive to growing a number of companies. And third, this relationship is an important pipeline for driving more customers and transactions to our platform, and we expect to on-board new joint customers on the platform this quarter.

Our goal is to always get our foot in the door of our customers and have significant long-term potential, and then expand our relationship over time. Nokia clearly has that type of potential, given the fact of its large global market share, and we believe our growing experience as part of Nokia USA will position us well as they evaluate their global online initiatives.

Now turning to some other earlier-stage wireless customer relationships, things continue to progress but at a relatively measured pace at Sprint. We believe we have demonstrated how Synchronoss can help Sprint transform their customer experience in various sales channels in ways that will benefit their overall business. However, they are currently executing against numerous internal initiatives in which Synchronoss is just one of many and are undergoing a material amount of internal organizational change. This has caused a measured pace to our deployment plans, but we are seeing a more focused effort in internal priority towards improving the customer experience, which is encouraging as it relates to scaling our relationship.

We continue to work on transactions associated with Sprint's e-commerce channel, and we still expect to being ramping more meaningfully as we exit 2008 and head into 2009. After all the processes are worked out, we will look to drive a more automated and best-in-class customer experience. We continue to believe the long-term opportunity with Sprint is significant, and that said we've always been candid about stating that the initial timing of how new customers and transactions ramp can be difficult to predict given the number of variables at a customer that are beyond our control. We will continue to provide investors with updates on this front as more meaningful developments occur.

Vodafone was another international opportunity that we discussed last quarter. Our initial work during the early discovery phase related to scoping to how to most effectively deploy our ConvergenceNow platform in Germany in support of their converged services. The area that we are targeting to begin our relationship and deploy our platform relates to helping Vodafone manage and execute converged service transactions between itself and Arcor, which was an organization that Vodafone had a 60% ownership in stake but which had distinct IT systems different from Vodafone.

During the second quarter Vodafone acquired the remaining 40% of Arcor, giving them full control over the combined companies' operations and IT infrastructure. Obviously with this acquisition Vodafone's IT department is evaluating their overall strategy relating to the activation process of converged services that will interact between Vodafone's and Arcor's system. The resulting new set of organizational changes and processes has caused us to extend our discovery phase into the fourth quarter of 2008. We will continue to have our staff engaged and on site throughout the fourth quarter and helping define both technical and contract requirements.

The potential outcomes at Vodafone are still the same. We could start with a trial of our platform, as we do with many of our customers, and then expand Vodafone's use of our platform in 2009. We could agree to terms and processes in 2008 and begin an aggressive ramp in early 2009. Or we could fail to reach an agreement all together. As we pointed out on our last call, we did not expect any material revenue related to Vodafone during 2008 as we were in such an early phase. In addition to our early discovery phase work, we are continuing discussions on additional opportunities to deploy our platform at Vodafone, and we will continue to update investors as appropriate as we proceed with Vodafone throughout the rest of the year.

The bottom line is that between Nokia and Vodafone and other opportunities we are pursuing, we continue to believe that we are well positioned to establish a solid international reference account. These are strategic engagements. However, the sales and decisions cycles can be lengthy, which is no different than the domestic market. However, based on experience, our relationships are established, they tend to be long term, and they grow well over time.

An example of growing with a customer over time and one of the highlights of our second quarter was kicking off our expanded relationship with Time Warner Cable, in which we are supporting their national e-commerce channel related to video, broadband and telephony transactions sold on the Web. Synchronoss will manage 100% of transactions that occur through their e-commerce channel, positioning Synchronoss to benefit as Time Warner Cable promotes a more national distribution strategy for selling the full suite of Time Warner services via their website.

And besides growing our e-commerce skills in the large cable MSO market, we have recently begun discussion with Time Warner to enable their consumers to set up their account online and order and manage various content options from their wireless handset device. Once consumers are registered on the site, they'll be able to order content, program their DVR and perform other services, all this from the mobile handset device. The program is in its early stages and expected to be deployed in trial in the fourth quarter of this year, but we are excited about leveraging our online and device expertise in unifying the consumer-customer experience.

The expansion of our AT&T relationship to manage all consumer services sold at AT&T over the Web and e-commerce and our recently expanded TWC relationship are examples of Synchronoss establishing ConvergenceNow as the technology platform of choice for Tier 1 communication service providers looking to deliver best in class and a much more efficient user experience to drive increased adoption of converged services via their e-commerce channels. As other communication service providers look to their online presence and innovative ways to sell converged services, we believe Synchronoss will be well positioned.

Our relationships with the top cable MSO companies provide us strong opportunities to leverage both past and current investments as they prepare for the preparation in the WiMax joint initiative between Clearwire and Sprint. We are in discussions with most of the cable MSOs, and as you may recall we were previously engaged with both Comcast wireless and Time Warner wireless in an early-stage joint venture with Sprint. Final details related to the overall Clearwire-Sprint WiMax venture still need to be determined and approved by regulators, and as such the timetable of our related projects has some variability in the near term. However, we believe that Synchronoss' existing customer relationships, unique technology platforms and domain expertise positions us well for the long term.

In summary, our second quarter performance was in line with our expectations. Our relationship with AT&T remains strong as we continue to add new transaction types and programs. And with Time Warner Cable we kicked off another exciting relationship which further solidifies ConvergenceNow as a platform of choice and as additional Tier 1 service providers get serious about their e-commerce channels and the deployment of converged services. Through our relationship with Brightpoint we began a relationship with Nokia that we believe has long-term upside. And furthermore we're in the early stages with other customer engagements such as Sprint that we believe have meaningful, long-term opportunities.

There are always some timing variables that are beyond our control as we on-board a number of new programs and transaction types during the second half of 2008. However, I expect the company to return to solid sequential growth in the second half of the year. We should also continue to generate strong profit margins as we are optimistic about the long-term base on our strong competitive position and our proven value proposition.

With that, let me turn it back to Larry.

Thank you, Steve. I would like to provide additional details on the second quarter performance in addition to our guidance for the third quarter and full-year 2008. Starting with the income statement, revenues were $24.3 million which was in line with our guidance. Excluding the impact of the iPhone-related revenue, our total revenues were up approximately 17% on a year-over-year basis and flat on a sequential basis.

Our overall AT&T revenue represented 67% of our total revenues compared to 72% in the previous quarter and 81% in the second quarter of 2007. The revenue from our other customers represented the remaining 22% of our total, up from 28%in the previous quarter and 19% in the second quarter of 2007. Revenue from our customers outside of AT&T grew 35% on a year-over-year basis.

From a revenue mix perspective, 80% of our second quarter revenue came from transactions processed. The remaining 20% was generated from professional services and subscription services.

Turning to cost and expenses. We will review our numbers both on a GAAP and non-GAAP basis. There is a reconciliation table between the two in our earnings release. Our non-GAAP results exclude stock-based compensation expense.

Non-GAAP gross profit in the quarter was $12.8 million, representing a non-GAAP gross margin of 52.5%. Turning to operating expenses, non-GAAP research and development expenses came in at $2.2 million or 9% of revenue, while non-GAAP SG&A expenses were $3.7 million or 15% of revenue. Depreciation was $1.5 million or 6% of revenue.

Non-GAAP income from operations came in at $5.4 million, representing a non-GAAP operating margin of 22% and compares to $9 million in the year-ago period.

The company's tax rate for the quarter was 41.2%, leading to a non-GAAP EPS of $0.11. It should be noted that the effective tax rate is higher than expected, driven primarily by the inability to realize R&D tax credits as the tax legislation has not been enacted as of this date. This obviously may change at some point during the year.

On a GAAP basis including stock-based compensation expense of $1.6 million, the resulting GAAP income from operations and net income for the quarter was $3.7 million and $2.6 million respectively. The resulting GAAP diluted earnings per share was $0.08.

Looking at our cash, total cash, cash equivalents and marketable securities totaled $94.9 million at the end of the second quarter. This is a decrease from the end of the previous quarter due to $10.4 million that was used to repurchase our common stock. As a reminder last quarter we announced that our board of directors had approved a $25 million share repurchase program.

We continue to generate positive cash flow during the quarter with $4.2 million in cash flow from operations, bringing our total to $9.5 million for the first six months of 2008.

Now, let me turn to the guidance for the third quarter and full year 2008. For the third quarter of 2008 we expect total revenues in the range of $26 million to $28 million and non-GAAP EPS between $0.11 and $0.13. Our EPS forecast assumes a tax rate of 42% and 32.5 million shares outstanding.

For the full year we are increasing our revenue range to $110 million to $117 million. Last quarter we commented that a variance within or outside of our previous revenue range of $115 million to $120 million was possible due to the number of early-stage customers and transaction types we were in the process of ramping. Such programs include the new initiatives we are working on with AT&T, Time Warner Cable, Sprint, the new initiative relative to the wireless launch with an existing customer as well as two new programs that we are not yet in a position to share details on.

Each customer situation has a unique set of circumstances that drive the timetable for moving transactions to our platform. In addition, we believe it is also prudent to expect the increasingly challenging macro-economics environment to serve as an additional variable that can influence how aggressively customers move forward, not the mention the impact this economy may have on the volume of existing programs.

The bottom line is we feel very good about the health and direction of our business. We expect sequential revenue growth of 7% to 15% in the third quarter with greater than 15% sequential growth in the fourth quarter. At the same time we expect the company to deliver strong profitability and non-GAAP EPS of $0.54 to $0.60 for 2008 which is consistent with the view we shared last quarter.

In addition to strong non-GAAP operating margins in the 25% to 26% range, we currently expect shares outstanding of approximately 32.5 million which is reduced from our previous expectation of 34.3 million primarily as a result of the execution of our share buyback program. We are using our strong cash position and cash flow capabilities of the Company to enhance shareholder value.

In summary we believe Synchronoss is positioned to return to growth in the second half of the year. We are confident in the long-term fundamental position and growth opportunities the Company is addressing, and we have a strong financial profile highlighted by a cash position of $95 million and non-GAAP operating margins of over 25% thus far.

With that, let me turn it over to the Operator to begin the Q&A. Thank you very much.

(OPERATOR INSTRUCTIONS). Your first question comes from the line of Tom Ernst from Deutsche Bank. Please proceed.

Good afternoon. Thanks for taking my question.

Hey, Tom.

Hey, Tom.

Larry, first question for you. Just to be clear, you're widening the guidance range for the year at the bottom end. Are you saying that the range you gave last quarter is still possible, or are you saying that that was possible then and it's not now?

The range I gave last quarter was between $115 million to $120 million. The way we're looking at the business right now, it's a range from $110 million to $117 million. When we look at some of these newer programs and the timing of when they're going to actually drive transactions to the platform, we decided to widen the range but lower the top end of it as well.

Okay, understood. That's clear. So to boil it down, you've got all of the same business development in process that you had last time you spoke to us, plus a couple of new developments, but the timing is a little bit less quick on a couple of the big ones, in summary. Is that accurate?

That is exactly the case, Tom

Okay. One final question in follow-up to that. You've got good year-on-year growth outside AT&T in the quarter, but if my math is correct it looks like it's essentially flat sequentially. What are the gives and takes in that? Are you having renewals across the customer base, or are there any repricings to the negative? And is there any new business as well outside of AT&T that was a revenue event?

Actually there is--let me answer these questions as best I can because I want to try to make sure I address each one of them. I think your first question or second question was about any changes in terms of the contracts. In that case there has been none. In terms of the sequential growth, you're right. It was flat from the first quarter to the second quarter which wasn't unanticipated. We did anticipate sequential growth in the first to second quarter. Most of the growth that we expect--which is by the way very common for our business, specifically in the Voice over IP area--it's usually more back-end in the second half of the year. And in many cases the first quarter's pretty strong. So there isn't any changes in any existing contracts. Most of the volume from the new programs and even from the existing programs are going to be in the second half of the year. Which is traditionally the case for us.

Okay. Thanks again.

Thanks, Tom.

Your next question comes from the line of Tom Roderick from Thomas Weisel Partners. Please proceed.

Hi, Steve. Hi, Larry. Good afternoon.

Hi, Tom. How are you doing?

Good. Good. So Steve, you mentioned a couple of times you sort of hinted at some timing visibility challenges in your discussion with some of your customers in terms of the timing of the ramp associated with their programs. Can you speak to how much of this is sort of industry-wide challenges? Customers perhaps like Sprint or maybe Vodafone that are having specific issues to their own business and are really slowing down project spend across the board? Or is this something that's more specific to Synchronoss? Can you just give us a sense as to what's driving some of the visibility challenges with the timing of these projects?

Sure, Tom. In certain instances especially some of the newer initiatives that we're doing involve kind of a combination. There's not one overwhelming reason for that. There's areas where there's just technical complexities that the client must do in a certain period of time for our platform to obviously work, and so there's some dependencies around how quickly they can do that internally, and so that has a tendency to be something that's hard to time. Clearly Vodafone and Sprint with some external challenges on one hand makes the solution that we bring to them in my opinion that much more compelling, but it does create organizational changes that require shifting or changing of the guards, and those changing of the guards obviously then delay kind of final process approval and sign-off. So some of that involves from a process perspective and an organizational perspective, and some is just as we move forward we're making some technology assumptions especially as we get more and more into converged services which drives obviously the higher value proposition for Synchronoss. But as we get into those with customers, we're dealing more now with traditional wireline systems having to work seamlessly with traditional wireless systems. We pull that together on the front end, but there's some basic plumbing that they need to do on the back end. And so that's been a part of it. I think the piece that you hear that we feel good about, especially in some of the programs that we launched like AT&T commerce, they've come through and we're working as scheduled. But it's really hard to predict the timing, and as that goes into fourth quarter if that ends up moving a little bit one way or the other and bleeds into 2009 that's hence why we decided to widen the range.

Okay, good. Going back to AT&T, you mentioned a couple of new agreements, and I understand you can't talk much about the IT-based services agreement. To the extent that you can talk about the converged services on the consumer, I think you mentioned as wireline, all wireline converged services, a little bit more detail if you can offer any around this. Which element of converged services it captures? And then also as we think about AT&T next year, we've seen this come down as a percentage of revenue. Would it be wise for us to think about that percentage of revenue going back up as we look at these two big projects kind of kicking off in the back half of the year?

That's a good question, Tom. Let me give you some insight around the converged services. So the converged services is as you know as AT&T takes their competitive position with obviously owning the whole wireless network and plugging in, for lack of a better word, all the other services that they have, one of the ways to offer really powerful and compelling national distribution strategy is through the Web. And so we're going to start initially as we typically would with their e-commerce, and part of the transactions that I'm referring to are those customers that want to buy not only wireless services but DSL, high-speed data, other traditional wireline services that are associated with AT&T. As they roll out more and more services, i.e., like Unity was rolled out a while ago, the ability to pull that together given that that's coming together as you can imagine from a bunch of different companies they've acquired through the years, that's the area that we're focused on right now. Has the technical challenges as we work through them to make that very seamless, but it also has the long-term prospects that we're excited about. And so from a converged perspective that's kind of what's driving that. In terms of these two opportunities we think that both of those opportunities next year, if you look at our business as reported outside of the iPhone component, our core AT&T business, we expect them to have good growth. We expect these programs as well as our existing programs to contribute to that going forward.

Okay. So kind of think about the non-iPhone AT&T growth opportunities and non-AT&T growth opportunities growing in sort of the same respect next year?

Yes, that would be a safe assumption. As with any new product, what we do especially with some of the newer multi-year deals that we struck, as that service becomes either widely accepted or is taken off, that would obviously influence us. What we're excited about is by the nature of kind of the basic minimums that we typically do in our contracts, it provides us a real good view that this has potential. To the extent that consumer adoption takes off on this particular product, that would be significant for us.

Okay. Great detail. Thanks, guys.

Your next question comes from the line of Shyam Patil from Raymond James and Associates. Please proceed.

Hi. Good evening. Just regarding the sequential ramp that you guys expect in 3Q and 4Q, how should we think about that? Is that dependent on on-boarding a new customer? Is it more from penetration within a well-established customer? How should we think about that?

Shyam, this is Steve. So we have a lot of programs that are coming on board. I would say that it's certainly the combination of a bunch of items, but I would say that one of the first areas is taking a look at all of the programs that we have going on with some of these newer transactions and trying to layer in for the rest of the year at what point will they be out of test and into full production, and then how much of full production will hit '08 versus '09. So there's an element of that associated with it. Clearly we have to look out into the future and at least understand the economic situations that are out there today, which as Tom had mentioned earlier may or may not impact decisions on what they need to invest to support our platform. So we take into consideration those elements. And you have a couple of different ways to look at it, and that's essentially what was driving the particular wider range. I will tell you that there's a bunch of--it's not just one particular program. It's the programs that we mentioned earlier across the board.

Okay, got it. And you guys cite macro weakness starting to show up. How did that affect how you might have accounted for transactions going forward versus how you might have done it before? And did you apply some type of haircut there?

That's one of the reasons, Shyam, that we took such a wider range in terms of how we're looking in terms of the guidance. What we're seeing is certainly a slowness if you will in terms of the way customers, our customers, are reacting to specific programs and how fast they're moving. It's almost as if there's a governance process that they need to go through before they move in any way. So we're seeing a little bit of slowness. We don't see the movement that they had had as we had seen in the past in terms of rolling out new programs. It's not that they're not committed to the programs. It's not that the programs won't move. It's just the speed at which they move. And we wanted to take that into consideration. And we're not going to also ignore the fact that the environment, the economy out there, is pretty weak. And as you know we are a platform, and we rely on our customers to drive those transactions to our platform, and so we're not going to ignore that as well. So we took that into consideration when we looked at our revenue guidance in terms of how wide it could be. So it's really more about how quickly a particular program actually gets and goes into production. It's not whether or not we get the program. It's more about the timing of when that program goes in, and that is why we widened that range.

Okay, that makes sense. And last quarter you gave fourth quarter iPhone revenue guidance of I think about $2.5 million is what it backed into. Any update on that? And then since you're not doing work on the consumer side for the 3G as far as we can tell, should we assume that that's from the enterprise business? And if so, are you guys the sole activator for that?

Shyam, this is Steve. So we kind of have two programs we support today. Certainly all of the 2G business which is obviously those who buy a new 3G phone for example and then pass on the 2Gs. They obviously get retethered and reactivated, so they're transactions. And then it is the 3G enterprise business. And as the 3G enterprise business, as you know one of the targeted areas for the 3G phone is the enterprise business. And so as we look forward we're going to be pulling the iPhone back in with our other transactions because it's going to be delivered in a very similar model that we've traditionally had it. But those are the two factors to answer your question, that are transactions that we're going to continue to support for the foreseeable future.

Okay. And do you have any sense as to whether or not you guys are going to be the exclusive activator for the enterprise for the 3G iPhone?

We have. We do support it today, so if you're an enterprise customer and you order it through the online channel, we're the only provider that would enable that phone.

Okay. Thank you.

(OPERATOR INSTRUCTIONS). Your final question comes from the line of Mr. John Bright from Avondale Partners. Please proceed.

Good afternoon. This is Tom Kucera for John Bright. First of all I wanted to ask a little more about the Brightpoint agreement. I wanted to understand that better. And first, my understanding is that this applies only to Nokia USA, and my thought is that these types of activations are probably much more common in Europe and I'm wondering if it's really a product of your carrier relationships maybe that's kept you out of Europe so far in that?

It's been--the relationship--let me kind of give some clarity around it. The exciting point about the Synchronoss-Brightpoint relationship is it's designed not only to target obviously handset device players, but it's also the full range of services. So Brightpoint obviously supports multiple logistics from data cards to computer peripheral equipment, and so the relationship allows the two of us to go to market and provide a pretty compelling value proposition to those electronics or handset device manufacturers that want to either A, ship hot phones, for lack of a better word, or if you're a computer manufacturer and you want to have a hot data card be shipped with the actual device and get a user to sign up at the time of service. The relationship provides a great pipeline of opportunities. As I mentioned in my remarks, we expect to on-board even this quarter a couple of additional customers through the Brightpoint relationship. And so it's designed to be more peripheral than just specific handset focus. As it relates to Europe there's an equally compelling opportunity there, and we're just at the very early stage of the relationship but we feel like that relationship has a lot of good opportunities to show value. And I think the Nokia USA is just one of many that we think we can go out there and get.

You don't think there's anything structural keeping you from a similar type of agreement in Europe?

No. In fact our Brightpoint agreement does cover both domestic and international.

Okay. And also on the front of Europe aside from Vodafone and given that your Vodafone testing has been pushed back here some, are there any other carriers or any stages with that that you could comment on? Or would you be at a very early stage from anyone else in Europe?

We typically don't get into discussing the pipeline of opportunities. We clearly are talking to a lot of the major European providers, as you would imagine. Vodafone we've had a paid engagement associated with that as we try to figure out what's the best relationship going forward. We have focused just like you can see with Nokia on going after the large provider that has the capability of doing two things for us. One, getting us implemented to a referencable account with scale. And then obviously through the scale is how we drive the margins in our business and provide the customers with the benefit that they're looking for as well.

I understand. Last question I want to ask about was in terms of cable operators. Have you seen any interest in any other operators maybe moving toward--what their reaction is towards what you're doing at Time Warner?

It's been a very--we've seen a very similar response like we got in the early days when we rolled out our Voice over IP offer. It's a very collaborative world, and the exposure that Time Warner has given us both publicly and in our announcement but also within the cable MSO market has been really strong. And we feel like we should be able to--we should be leveraging that going forward. So I believe that the cable MSO spectrum which has traditionally been more regionally based is going to look for converged services as a way to differentiate and grab more revenue and RPU. But the way to do that is you've got to have some national distribution in order to do that, and the Web is obviously a great place to start. And I think it's been an undervalued marketing channel partly because there hasn't been investments on the marketing side, which I believe most of them are making now. And secondly is just the overall how do you pull that experience together so that the customer really gets a unified Time Warner experience? And that's ultimately where we've had a lot of focus with Time Warner, and we believe that's been a nice catalyst not just through the cable MSOs and their online penetration but also with working with them in the very early stages obviously of the Sprint-Clearwire joint venture where they're looking to add a WiMax or 4G component to offers for their customers as well.

Good. Thank you, Steve.

Sure. Thanks.

At this time there are no further questions in queue. I'd like to turn the call back over to Mr. Steven Waldis for closing remarks.

Again, thank you very much for joining us on our second quarter call, and we look forward to updating all of you shortly. Thank you.

Thank you for your participation in today's conference. This concludes your presentation. You may now disconnect. Good day.