Synchronoss Technologies Inc (SNCR) 2008 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the fourth quarter 2008 Synchronoss Technologies, Incorporated earnings conference call. My name is Stacie and I will be your conference moderator for today. (OPERATOR INSTRUCTIONS.) As a reminder, this conference is being recorded for replay purposes.

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

Thank you, Stacie.

Good afternoon and welcome to the Synchronoss fourth quarter and full-year 2008 earnings conference call. We will be discussing the results announced in the press release issued after the market closed today. Again, I am Larry Irving, Chief Financial Officer of Synchronoss. 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 a discussion of the material risks and other important factors that could affect our actual results, please refer to our SEC filings, including our annual report on form 10-K for the year ended December 31st, 2007.

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-looking outlook. Thanks. Steve?

Thank you, Larry. Good afternoon and thanks for joining us on our call today to review our fourth quarter results, which were consistent with our expectations and highlighted by strong sequential revenue growth. We are also encouraged by recent business developments and opportunities that Synchronoss is addressing as we head into 2009, and which some of these we will be discussing today.

We are excited to have recently signed a new three-year contract with AT&T that represented the largest and most comprehensive agreement in the history of Synchronoss. In addition, we believe our recently introduced ConvergenceNow Plus platform positions us well to capitalize on what we believe is a growing market opportunity associated with emerging devices.

We are also happy with our first emerging device deployment, CruiseCast, which we are actively working with other providers of emerging device manufacturers on additional opportunities for deploying ConvergenceNow Plus.

And while the economic environment continues to have a negative impact on transaction volumes generated by some of our clients, we are optimistic about Synchronoss' outlook for 2009 based on our new AT&T agreement, the potential associated with early-stage programs, and the early progress of our emerging devices go-to-market strategies, as well as the existing opportunities with both existing and prospective customers.

Now, let me turn and provide a summary review of our fourth quarter financial performance, followed by an update on some key business development activities.

We reported quarterly revenues of $31.2 million, which was in the upper half of our guidance for the quarter, and represented a sequential growth increase of 19%, compared to $26.3 million in the third. And from a profitability perspective, we generated a non-GAAP operating margin of 20%, leading to a non-GAAP EPS of $0.12, which was consistent with the midpoint of our guidance from the previous quarter.

We ended the fourth quarter with a very strong balance sheet. Our cash was approximately $78.8 million, with essentially no debt, and we generated approximately $26.4 million in cash flows from operations during all of 2008.

From a summary perspective, our fourth quarter was a strong finish to 2008 and built on the momentum that we had exiting the third quarter. We entered 2009 with a strong financial position, a proven history of delivering both profitability and strong cash flow, and many opportunities for growth.

Now, let me turn to our business operations and beginning with our largest customer, AT&T. During the fourth quarter, our AT&T revenue grew 19% on a sequential basis with growth driven by a degree of year-end seasonality and the move to production with our platform supporting AT&T's converged wireline services that are sold via att.com website. Our core AT&T revenues grew 19% on a year-over-year basis, as if we were to exclude iPhone related revenues from a year ago period. For the full year of 2008 our core AT&T revenue was up 13% on a year-over-year basis.

The most significant news regarding AT&T, however, was our recent announcement of a new three-year agreement, which was the largest and most comprehensive agreement in the history of the Company. This new agreement is further validation of Synchronoss' unique value proposition and the ongoing and evolving partnership that will take place at AT&T over the next several years.

We believe the driver to this continued expansion of our relationship with AT&T has been our proven ability to partner with AT&T in lowering their operating costs and, at the same time, improving the quality of their customer experience. Our new agreement further deepens and solidifies our relationship from a long-term perspective. And there are key aspects of the agreement that we believe are important for our shareholders.

First, our previous agreements were signed with the old Cingular, now AT&T Mobility, whereas our new agreement is with Corporate AT&T and can be used across the new AT&T. This three-year agreement, which actually has an option to extend for years four and five on similar terms, is the longest-term commitment AT&T has made to Synchronoss. And it consolidates and replaces a number of individual and annual contracts that we previously had in place.

The new three-year agreement covers all of our e-commerce work, both in our consumer and business areas, and includes minimum transaction volumes that, going forward, are material in nature as compared to the older agreement that had much lower minimum commitments and that were not material.

Secondly, and the most fundamental change, was that our original contracts were designed to facilitate the onboarding of incremental and discreet transaction types. Our new agreement, multi-year agreement, provides AT&T with the ability to more easily onboard entire channels with us, as reflected by the fact that it scopes out parameters of our relationship in managing growth in existing channels and defines work efforts for adding and growing new channels.

Also contemplated in the agreement is pricing to scale and handle transaction volumes that are as much as 300% to 400% greater than those that we are currently managing. But to be clear, there is no commitment to specific channels or to actually delivering these much higher transaction volumes at this time.

Third, we believe our agreement is a win/win for both companies. As it relates to AT&T, the agreement provides them with greater visibility into their long-term cost structure, with volume discounts as they scale to higher levels beyond today's current volumes, and higher and more robust guaranteed service levels as compared to our prior agreements.

From our perspective, we believe it benefits in several ways. First, we have better long-term visibility into revenue associated with AT&T, our largest client. Second, we have higher guaranteed and material minimums that we had not had in our prior agreement. And finally, a related aspect is that we believe our new agreement has natural incentives in place which will allow AT&T to expand Synchronoss' platform across new channels throughout the new AT&T.

Separately, it is worth noting that we extended our separate agreement with AT&T regarding the activation of the iPhone related transactions. In addition to providing activation services for the 2.5G version of the iPhone, Synchronoss is now managing a segment of the transactions specific to local number porting for the 3G iPhone on behalf of AT&T, independent of which channel the iPhone is purchased through.

And I want to note that we exited 2008 with an iPhone run rate in excess of 10 million annually, which is consistent with the expectation we shared several quarters ago. And during the fourth quarter AT&T began selling the 3G iPhone to consumers via its highly successful att.com website, allowing consumers to order phones from their home or anywhere they have internet access, and they will essentially be shipped a hot phone. This means consumers are no longer required to visit a retail store in order to purchase and activate a 3G iPhone.

We believe this is beneficial to Synchronoss for consumers who prefer an online experience versus the in-store experience, and to the degree they select AT&T as their destination website, and as long as AT&T continues to market and sell the device through its e-commerce channel.

As I had mentioned earlier, we are increasingly excited about the opportunity we believe we have to establish our recently introduced ConvergenceNow platform in the embedded wireless consumer device market, which we believe is an additional large and untapped market opportunity.

Our ConvergenceNow Plus platform is focused on supporting and enabling different types of wireless enabled consumer devices to be activated and supported on multiple networks. It extends our platform into account and lifecycle management, expanding the types of transactions our platform can manage, such as credit card transactions, inventory management of emerging devices, trouble ticketing on devices, and product catalog capabilities for emerging devices, to mention a few. All of these are obviously in addition to the core activation related services that we automate for all of our customers.

We are also excited to announce our first deployment of ConvergenceNow Plus platform at CruiseCast, which is the IPTV satellite initiative that we discussed at the high level on last quarter's call. This is the first emerging device to deploy our ConvergenceNow Plus solution. AT&T is teaming up with RaySat to offer CruiseCast in-vehicle entertainment and the partnership extends through Avis Budget Group.

CruiseCast offers over 20 video channels, along with an equivalent number of music channels, and is installed directly in your vehicle at the dealer locations and will become nationally available in the spring of 2009. The Synchronoss ConvergenceNow Plus platform will be responsible for the complete subscriber management process, including activation, trouble ticketing and inventory management.

In addition to putting our platform at place in another channel and with a new program, this has the potential to scale over time. And the deployment is particularly important because it's a step forward in establishing Synchronoss as the platform of choice for all kinds of emerging device suppliers.

We intend to focus energy on this market. And emerging devices is an important part of our growth strategy outside of our traditional communications service provider customer base. We believe opportunities exist with leading OEM manufacturers, computer and hardware companies, camera and video manufacturers, and essentially any consumer electronic device that will require some form of wireless enablement and activation.

And in addition to CruiseCast, we've recently shared our involvement with Brightpoint and Nokia. We are marketing and pursing additional meaningful opportunities with Brightpoint as it relates to OEM providers that provide from our combined value proposition. During this part quarter we onboarded another customers with Brightpoint, Dell Computer, and we look forward to sharing more details on the progress of other emerging device opportunities within this channel in the quarters ahead.

In addition, we expanded our platform across traditional transaction types in channels our Tier 1 customer base. Collectively, revenues generated from our customers outside of AT&T grew 30% during the fourth quarter and 25% on a full-year basis.

During the fourth quarter we continued our relationships with our cable MSOs. We went live with Time Warner Cable's e-commerce channel, TWC.com, and deployed our platform for Comcast's businesses services group, supporting their rollout of commercial voice over IP services. With Cablevision we also started to work on some fixed mobile convergence opportunities that enable both traditional and new platform offers.

In addition to the above, we continue to strengthen and expand our relationship with communication service providers such as Level 3 and Vonage, among others.

And on the wireless side of our business our transactions volumes with Sprint grew as expected during the fourth quarter. However, the process continues to be highly manual. For customers to realize the full value that Synchronoss provides, it's essential that we move to a highly and increasingly automated process.

Synchronoss is ready and capable of rapidly implementing such automation, and it is the focus on what we're doing in 2009 as it's not economical for us to continue with limited automation over the long term. There continues to be plans for ramping the automation; however, the business environment has caused a significant amount of constant internal change at Sprint, which impacts changes to business processes and impacts our progress.

And at Vodaphone we continue to proceed with our discovery phase engagement, and a number of professional service engagements that have been requested and the number of opportunities being evaluated have continued to expand. We consider those to be minor but positive developments. And the range of potential outcomes at Vodaphone remain the same as previously discussed.

In summary, our fourth quarter performance was solid. As we enter 2009 I want to reiterate the point that no company is immune to the negative pressures of the economy. And we are feeling, and may continue to feel, an impact as the result of some of our customers generating lower volumes on a same-store basis.

However, we are optimistic about Synchronoss' outlook for 2009 based on our belief that customers will want to reduce costs faster in this environment, our new longer-term contact with AT&T, and the potential with early-stage programs, and the progress of our emerging devices go-to-market strategies, as well as opportunities with both existing and new customers.

With that, let me turn it back over to Larry.

Thank you, Steve. I would like to provide additional details on our fourth quarter and full-year 2008 performance, in addition to our guidance for the first quarter and full-year 2009.

Starting with the income statement. Revenues were $31.2 million in the fourth quarter, which was in the upper half of our guidance range of $30 million to $32 million, and represented an increase of 19% on a sequential basis.

Consistent with the expectation we shared last quarter, the sequential increase in our fourth quarter revenue was driven by a degree of positive year-end seasonality, incremental contribution from a full quarter of Wisor and, most importantly, increased contribution from onboarding transactions associated with some of our earlier stage programs. If we were to exclude the impact of the Apple iPhone revenue, our total revenues were approximately 23% on a year-over-year basis.

Our overall AT&T revenue represented 64% of our total revenues, compared to 66% in the previous quarter and 76% in the fourth quarter of 2007. The revenue from our other customers represented the remaining 36% of our total, up from [34%] (corrected by company after the call) in the previous quarter and 24% in the fourth quarter of 2007. Revenue from our customers outside of AT&T grew 30% on a year-over-year basis and 26% sequentially.

From a revenue mix, 84% of our fourth quarter revenue came from transactions processed. The remaining 16% was generated from professional services and subscription services.

Turning to costs 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 $17.1 million, representing a non-GAAP gross margin of 55%, which was an increase over last quarter.

Turning to operating expenses, non-GAAP research and development expenses came in at $3.3 million or 11% of revenue, while non-GAAP SG&A expenses were $5.4 million or 17% of revenue.

Depreciation and amortization was $2.1 million or 7% of revenue.

Non-GAAP income from operations came in at $6.3 million, representing a non-GAAP operating margin of 20%.

The Company's tax rate for the quarter was 41.1%, leading to a non-GAAP EPS of $0.12, which was within our guided range of $0.11 to $0.13.

On a GAAP basis, including stock-based compensation expense of $2 million, the resulting GAAP income from operations and net income for the quarter was $4.2 million and $2.7 million, respectively. The resulting GAAP diluted earnings per share was $0.09.

Taking a look at our summary results for the full-year 2008, our total revenue was $111 million compared to $123.5 million in 2007. If we were to exclude the impact of the Apple iPhone in both years, our revenue from other transactions and relationships grew at 17% on a year-over-year basis.

Our full-year 2008 non-GAAP operating margin came in at 23% and drove non-GAAP EPS of $0.58.

Looking at our cash, total cash, cash equivalents and marketable securities totaled $78.8 million at the end of the fourth quarter, which is up from $73.3 million at the end of the third quarter. The increase in cash was due primarily to $8.3 million in cash from operations offset in part by $2.5 million in capital expenditures. For the full year 2008, the Company generated $26.4 million in cash from operations.

Now, let me turn to guidance for the first quarter and full-year 2009, beginning with the quarter. We are currently targeting revenue in the range of $28 million to $29.5 million for the first quarter. This takes into consideration our sequential move to a seasonally slower quarter, in addition to the fact that the macroeconomic environment continues to impact transaction volumes at our customers. Similar to the fourth quarter, we expect progress at new initiatives to partially offset these factors.

It is worth pointing out that the first quarter of 2009 is the last quarter that we will consider challenging from a year-over-year comparison perspective.

While we generated activation revenue related to the Apple 2G iPhone throughout 2008, it was during the second quarter of 2008 that our iPhone related volumes dropped significantly as AT&T brought the activation process for the 3G version into its retail stores.

From a profitability perspective, we are expecting the first quarter non-GAAP gross margins in the low 50% range and non-GAAP operating margin of approximately 18% to 20%. We currently estimate non-GAAP EPS of $0.10 to $0.12 for the first quarter, assuming a tax rate of 41%, and have approximately 31.5 million shares outstanding.

On the spending front, as we discussed last quarter and in Steve's remarks today, we are continuing to invest in our platform to support new opportunities such as further enhancing ConvergenceNow Plus for emerging devices, and supporting new programs across a number of our new customers and our current customers. These up-front investments are required to drive higher automation rates as quickly as possible and we expect to gain leverage off these investments over time. We also continue to aggressively pursue international opportunities.

We believe these investments will not only help Synchronoss through this more challenging economic period, but they will also position us well for improved revenue growth and profitability when the economy improves and volumes across our highly automated programs bounce back to its normal levels.

From a full-year perspective it is important to begin with our usual note regarding the fact that the level of impact, and the timing of such impact, from early-stage relationships and onboarding new programs can be very difficult to predict as they involve many factors that are beyond Synchronoss' control.

Secondly, we are operating with the mindset that the macroeconomic environment will remain challenging throughout 2009. Which, if that were to be the case, would likely dampen transaction volumes at a number of our more long-standing programs that are fully ramped. In addition, it may cause greater variability in our customers' actual transaction performance compared to their plans.

The bottom line is we do not control the transaction volumes of our customers. Our goal is to get our platform in place at as many customers and across as many programs as possible so that we can benefit as transactions come our way.

Taking these factors into consideration, we are optimistic that Synchronoss is well positioned to generate solid growth and profitability in 2009 based on our new agreement with AT&T, progress across a number of early-stage initiatives, and a solid pipeline of new opportunities.

We are currently forecasting total revenues in the range of $120 million to $126 million for 2009, which represents a return to a year-over-year growth in the high single digits to the low teens range. It is worth noting that this implies growth in the high teens range during the final three quarters of the year, keeping in mind that the first quarter is a very difficult comparison quarter.

As we have in the past, we will continue to provide updated guidance over the course of the year as we gain more visibility into the timing and traction of new programs and our current transaction types and new transaction types.

From a profitability perspective, we are targeting non-GAAP gross margins in the low 50% range, non-GAAP operating margins of approximately 20% to 22%, and non-GAAP EPS of a range between $0.50 and $0.56. This assumes a full-year tax rate of approximately 41%.

In summary, we are pleased with our fourth quarter results and with the progress the Company is making against its strategic growth initiatives. We have a new long-term agreement with our largest and longest standing customer relationship. We have exciting early-stage programs that we are onboarding across both AT&T and our broader customer base.

We are optimistic about our outlook in 2009 in spite of the increasingly difficult economic environment, and even more so longer term as we continue to enhance Synchronoss' already strong market position.

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

Thank you. (OPERATOR INSTRUCTIONS.) Your first question comes from the line of Tom Roderick with Thomas Weisel. Please proceed.

Hi, guys. Thanks and good afternoon. I was hoping maybe you could just talk a little bit about the dynamics of the AT&T relationship with respect to perhaps what's pushing more transaction types and more traffic in your direction.

Can you speak at a high level with respect to the idea that a managed services arrangement is a far more beneficial type of solution as big carriers try to cut CapEx? Or are there other dynamics that come into play when you're structuring big relationships like this? Thanks.

Hey, Tom. This is Steve. Certainly there's pros and cons in today's economic world. One of the pros certainly is the managed services environment allows us, through automation, to dramatically reduce costs at the same time improving service levels. And so, a lot of the work that we did in the fourth quarter, especially with AT&T in terms of onboarding their new wireline programs, are good examples of that.

And so, as we look forward into 2009, I think the dynamics that we focus in on are obviously the offset of potential existing programs that may have a dampened transaction flow, but offsetting that with the ability for us to go through and onboard programs more efficiently, since automation obviously drives a much better cost at the providers.

So, specifically with AT&T, thinking about transaction volumes that are -- that have an opportunity to grow, I think you said 300% to 400%, what would it take to -- what sort of channels would you look to add that could potentially create those volume growth numbers like you approached there?

Well, I think what's -- the agreement doesn't commit to any type of large scale transactions, but it definitely provides the ability to do so, Tom. And I think what -- and obviously to contemplate that type of growth, that would require new channels above and beyond the existing ones that we perform today.

And so, I think essentially what we're excited about is it took more of a global approach in terms of what are the items and elements that are required for our platforms and managed service to be deployed in a new channel, and took that into consideration and made it a win/win, I think, for both companies in the sense that Synchronoss kind of has a defined plan and opportunities to get there. And AT&T gets the benefit, obviously, of getting discounts on the higher volumes of those transactions. So, it really ends up being an opportunity or mechanism in the new contract for us to do that.

And more importantly, as we -- as I stated a few minutes ago, our old agreements were with Cingular AT&T Mobility. The new agreement is with Corporate AT&T. And so, that allows us to be utilized potentially across all of T.

Okay. Last question from me. Maybe you could just provide a little bit of an update on some non-traditional transaction types and update on the retailer big-box opportunities that you had talked a bit about last year.

And then, you also mentioned Dell Computer, which seems to be a little bit out of the norm of traditionally what you've done. So, can you provide an update in terms of the strategy of getting away from some of the carrier-centric deliveries there? Thanks.

Yes. Sure, Tom. So, it's a big part of our ConvergenceNow Plus initiative. And essentially, the -- let me start by answering the Dell question. The Dell is through our relationship with Brightpoint. And through Brightpoint, they use our technology and platform as they go and do pick, pack and ship opportunities for Nokia and Dell, in which there may be hot air cards being shipped out with the actual computers.

I think the opportunities that Synchronoss sees going forward, and why we're excited about our first deployment with CruiseCast, is there is a big push in the industry today to get devices onto the networks that the large carriers are offering today. And I think it's a big growth opportunity. As wireless saturation happens here in the US, the way for wireless carriers to grow is to offer ways to allow other devices -- I'll call them non-traditional devices -- to be activated on their networks; Panasonic devices, for example, cell phones, cameras, navigation devices.

And so, Synchronoss sees a great opportunity to play in that field in that we can be a great enabler of those devices and tie those into the various different networks that exist today, both -- not for just wireless, but even for high-speed data or IP type services.

And so, that's a growth area that we believe through our partnerships through Brightpoint, as well as directly with consumer OEM manufacturers or device manufacturers like CruiseCast, will want to contract us to have us manage that subscriber process from start to finish.

Great. Great. Thanks, guys. Nice job.

Thank you, Tom.

Your next question comes from the line of Tom Ernst with Deutsche Bank. Please proceed.

Good afternoon, gentlemen. Thanks for taking my question.

Hey, Tom.

It looks like your forecasting about a high single digit sequential decline, which is expected with a seasonal effect. And I would believe that there's many effects happening. It sounds like you've got some new business that's generated a little more volume, at Sprint a couple new deals. You've got normal seasonal effects in transactions. And then I think another thing investors have been worried about is, any time you consolidate a major contract like that, we would expect that you would have conceded near term in pricing.

So, a couple questions. It sounds on your comments with AT&T, as you were talking about discounts for forward volume growth, that you didn't yield a discount here in the short term. And then, secondly, what do you view as a normal seasonal effect if we didn't have those other issues? What kind of magnitude sequential decline do you think there is a neutral economy?

Okay. Let me answer it in two parts. Let me answer the second part -- question, Tom. On the AT&T contract, for some of the existing volumes, there are some discounts but they're not material. The discounts that really start to accelerate are with much higher volumes. And in return for those slight discounts on the existing business, we actually got material commitments for minimums, which we didn't have if you recall in the past.

And so, it was a really -- to your point, we view this, and we believe AT&T does, as a really good win/win for both companies. And we're both now motivated, obviously, to continue to improve the experience and drive cost out of the business.

In terms of the seasonality, you're right. Going into the fourth quarter, the wireless component of our business is seasonally high. And so, you typically see that component drop off under normal circumstances during the first quarter of the year. Then obviously, we took into consideration the timing of new programs which we think to some degree may offset that and looked at what the potential forecast may be, given in light of the economic environment and kind of looked at that as we provided out guidance going forward.

Ex everything else, though, what is the magnitude of seasonal effect? Do you think that that's a 5 or a 10 point kind of impact to your business typically?

Hey, Tom, it's Larry. I mean, typically in the fourth quarter, specifically around the consumer side or the wireless side of the business is where you see that seasonality. And it ranges from one year to the next. Obviously, this year was -- overall, I think volume was just slightly down from the pervious year in terms of volumes of transactions.

But you could typically see a range of anywhere from the 15% range to as much as 20% in terms of transactions. But again, the pricing associated with those transactions vary depending upon the complexity of those transactions. So, that has an impact as well that drives some of the change in our revenue streams.

Alright. Thanks again.

But there is some seasonality there in the fourth quarter that I would say range between 15% and 20%.

Alright. Thank you again.

Your next question comes from the line of ShyamPatil with Raymond James. Please proceed.

Hi, guys. This is David Eller filling in for Shyam. I was hoping you guys could help us understand your activation mix between smartphones and normal cell phones? And then maybe what your revenue is most sensitive to changes in?

I'm sorry, what was your name again?

This is David Eller filling in for Shyam.

Yes. So, one of the things -- what we do is we provision any phone that comes through the e-commerce channel, so it doesn't matter whether it's a smartphones or any other type of phone, and we don't typically share with what that volume is. So, that's -- I mean, that's pretty much--. I don't think we can under NDA, really, disclose the number of transactions that we do from a smartphone perspective to a regular phone perspective.

Okay. And then maybe you could tell us a little bit more about contracts up for renewal in '09. And then, also, if you could just touch on the growth drivers at kind of core AT&T for '09.

From an AT&T perspective, I mean, we believe that the opportunity that exists in our new agreements for potential growth is good for us going into the year. Obviously, we want to taper that expectation in light of the economic environment that are out there today.

But we think that there are certain opportunities for us, like what we've done here on the wireline consumer side. And where there are other areas of the business, obviously wireline and some of the newer services that have margin pressures at the carriers are good opportunities as you go to bundle these converged services. And so, those are natural areas that we think have a good feel for us taking over and having an opportunity to grow into the transaction size on that side of the equation.

I'm not aware of -- David, we can get back to you -- any renewals that are up at this time.

As a matter of fact, David, we don't usually share the renewal practices of our -- the renewal times of our contracts. We just announced the signing of the AT&T agreement. As a matter of fact, as an agreement is resigned then we share it. And there's obviously a lot of reasons why we don't share that but, as a matter of practice, we don't.

Okay. And then just finally--.

What I should say there is that, typically, our contracts are -- tend to be somewhere between two to three years and automatically have renewal periods in them as well.

Okay. Then just kind of last question. Could we get an update on uses of cash?

Uses of cash going forward?

Yes, for '09.

Yes. So we, as a matter of -- as you could see, this past year we generated somewhere in the neighborhood of about $26 million of cash from operations. We do expect to continue generating cash going forward in that neighborhood or a little bit less. There will be CapEx as always. As I've provided in the past, we -- our typical guidance in terms of CapEx range is somewhere in the neighborhood of about 10% of our revenues. And that's really dictated on some of the new programs that are coming onboard.

One of the things that we have talked about is we are moving into a new location in our Pennsylvania office, so there will be some capital expenditures around that. But that's the two major areas that I would talk about when I refer to cash, is generating pretty strong cash from operations and then the CapEx required to run the business going forward, which typically is around 10% of our revenues.

Alright. Thanks, guys.

Your next question comes from the line of Will Power with Robert W. Baird. Please proceed.

Great. Thanks for taking the question. I guess a couple of questions. First, on AT&T, I mean it sounds like there are some nice growth opportunities through '09 and beyond. Should we expect that then to grow as a percentage of revenue in '09? And any way to get a sense for magnitude of that?

The best way to look at AT&T, this past year we had pretty strong growth, as we mentioned overall. The year-over-year growth rates in T was roughly 13%. We expect growth going forward to be in the double-digit range as well. So, that's pretty much the way I would look at AT&T going forward.

Now, there are things that we are certainly cognizant of in terms of the economic condition that's going on. So, we're certainly cognizant of that and we factored that into our view in terms of our guidance. But as we see it right now, economic conditions aside, we expect to see double-digit growth.

And Will, this is Steve. Across our base that could be true in terms of -- certainly in tough economic times your overall embedded program transaction volumes as subscriber growth slows will impact you. But you also do have an equal offsetting at times, where the ability to onboard programs that may have taken longer because of the cost benefit that the carriers can get in managed service platform environment have a tendency to be a favorable wind.

Okay. And I was curious on the Sprint relationship. I mean, it sounds like that's been a little more -- a bit more manual intensive than might be ideal, ideally moving more towards automation over time. I wonder if you could give us any more flavor for what type of impact that may have had on margins in Q4, and how should we think about that impact moving forward in '09?

Sure, Will. This is Steve. I mean, certainly -- and not just true of Sprint but of all of our customers. When you're in a manual or highly manual environment it does impact your margins on a negative side. And one of the things that we want to do going forward is obviously drive that to a much more automation state.

And so, we're working hard with our partners at Sprint. There's a lot of challenges that are going on in the industry. But I think what's important for Synchronoss to focus on, and where we're really moving forward in '09, is we're at a transaction size in Q4 that we really need to move towards more of an automated state and that's kind of our plan going forward for the reasons you cited.

Okay. And maybe just a last question. I know you alluded to volume impacts related to the economic slowdown. Is that primarily a function of just the carriers being slower to deploy your products, or is that more a function just of slower online activity generally by their end customers, or is it a combination of both?

It's more of the latter, I would say, Will. But the first is actually more positive. So, in an environment we will see customers maybe move more aggressively to look for us to onboard programs a little bit quicker, like the consumer AT&T wireline work that we did in the latter half of '08.

The latter meaning that their subscriber growth -- as customers in our model give us forecasts, and those forecasts kind of usually have ranges -- I'm giving you a rule of thumb -- it's kind of an 80/110, where typically 80% of the forecast is kind of a pay or take and then anything above 110% the (inaudible) don't apply.

And so, customers have a tendency in environments like this to not obviously be at the higher end. It might be at the lower end of their forecast numbers. So, that's a negative impact. As those end subscribers don't send the transactions in to the carrier for us to process, that obviously impacts us negatively.

Okay. Thank you.

Your next question comes from the line of Eric Kainer with ThinkEquity. Please proceed.

Thank you very much for taking my call. And congratulations on a fine quarter.

Thank you.

My first question is, I believe AT&T Mobility, AT&T Consumer, Time Warner Cable are all 100% penetrated as far as the e-commerce channel. I wonder if you can kind of give us an analogous number for maybe Comcast or Embarq.

It's hard, Eric, to quantify. And even in some of those channels, even like for example a timewarner.com necessarily, without getting into specifics on our customer locations, not necessarily every particular region is up on certain times.

There's really -- the way to look at it is that we still believe in the wireless e-commerce space, although we're getting some nice beachhead platform deployments, we still think that the level of penetration for us -- and that could be true for both voice over IP and some of the work that we're doing with our MSOs -- we still have a way to go to penetrate those accounts further than where we are today. To quote a percentage on that would be tough. I wouldn't want to guess at it.

But essentially, how we scale is we get into a client, we get a couple of regions and/or services or transactions up and running, and then we add to those as the year goes on. And we expect that behavior to happen within all of our accounts during the course of the year.

So, as I had mentioned earlier, onboarding programs might be not only new programs for new customers, but also could be newer regions or service types within existing accounts that may want to move over to get the benefit of the lower cost.

Okay. Part of your answer there threw me a little bit, and that is do I understand correctly that not all the parts of Time Warner Cable, not every region is fully onboarded and ramped?

Not every transaction for every region is fully onboard. That's correct. And there's a process that obviously we can't share because it's proprietary with our customers in terms of going through that process as we enable each of the regions. But the majority of the transaction flow is onboarded today, just not 100%.

Okay. Now, are all of the transaction types onboarded now at Embarq? I think you had one that you were still working on as of about this time last quarter.

I know we have transactions involved with Embarq on the online channel, Eric, but I'd have to get back to you. I don't know that number off the top of my head.

Okay. Well, let me jump to the next question, if I could. Obviously, we've seen just about every one of your customers, everybody in the space, really, talking about taking headcount down. And when we look at service providers generally, the big chunk of people are obviously in customer service and that is obviously the leading space where you wind up helping improve the efficiency of operations.

Should we be expecting faster onboarding when we start seeing kind of headline numbers coming out of all of your various customers? At least the ones where you're not 100% penetrated yet?

Well, I think it's a -- Eric, as I said earlier, I think there are scenarios where in a tough economic environment, to the extent that you can automate typically manual processes, that's a positive in -- it's a positive outcome of tighter environments.

But you also have investments. As you deploy our platform, customers also have to make investments in terms of giving us the exposure to back offices to make the right automation changes that we need to, integrating with their front end by-flows or websites so we can capture these orders in an effective manner. And so, those are things that require investments and/or CapEx on our customers' side.

And so, those are things that, as much as the ability to automate to a certain degree, will absolutely be a positive. I think on the negative side, or areas that you have concern in tighter environments, is really allowing them to have the proper capital expenditures to do that.

Okay. That's a fair point. And then a last question from me is really around Sprint. I guess a couple of questions around Sprint. The first is how many programs have you now launched at Sprint? And secondly, as far as the program that you mentioned last quarter, which was Sprint XOHM, obviously you have an existing relationship with Clearwire on the voice over IP side. And I was wondering whether you've been able to extend that Sprint XOHM relationship to activations for all the broadband activations within Clearwire?

Certainly we have activities that are going on both in those areas, Eric, but we haven't obviously disclosed any of the details because of the sensitivity on the client. Other than to say that we've had a higher degree of transaction flow coming off of the fourth quarter. However, it is in a manual state and does impact some of the margins that we need to improve, which would come through automation. And we're working on it and trying to get there with our partners in the early part of '09. But we haven't really gotten to tell you the specific of the programs, as you can imagine, with the sensitivity of the data on the customer side.

And any view on how many programs you've launched at Sprint now?

We've just conceptually talked about both Sprint in general, as well as our XOHM relationship, but not the individual transaction types or programs that are underneath those.

Okay. Well, thanks again.

Take care.

And congratulations and good luck.

Thanks.

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

Thank you, Steve, Larry. Steve, should I interpret some of the comments you were making on Sprint as more cautious in nature because of the overall economic environment? Or should I perceive some of the comments as more cautious in that they're maybe not proceeding as fast as you might have hoped in the rollout of your managed services?

I think, John, what we're trying to communicate is that we are increasing the transaction volumes that we did in Q4, albeit very manual. And I think what we're trying to do is to really focus on transactions that are automated. And we really want to move to a state going forward where we can drive as much automation as possible, and to really get the ability to kind of automate some of these transactions that we're at today.

And so, clearly, with all of our customers there's the economic backdrop that's out there today. And Sprint, along with everybody else, is not exempt from that. But there's also a desire on Synchronoss' part to really drive more towards an automation process going forward rather than continuing to onboard transactions in a manual state.

Okay. On -- just kind of more of a philosophical question. So, when the iPhone stopped activation all online in the online channel last year, is that now a roadblock for that potentially to happen as a sole distribution channel for future hot handsets do you think? Or was that just one-off?

I'm not sure, John. I just want to make sure I understand the question. I'm not sure, John, I follow because the channel today that we support, besides just iPhones there are several -- all of the AT&T products through att.com.

Sure. Sure. Well, Steve, where I'm trying to go with it is I think they moved that over because of a special relationship with AT&T to try to drive certain penetration and they were seeing obviously some unlocked phones. Is that something that's going to keep another handset in the future from using the online channel only for activations looking forward?

I think in terms of the way that we operate today is a current process which is -- although it allows you to activate essentially without having to go to a retail store, it sends -- we do multiple devices today in a very similar fashion. So, to the extent that you would go and order a phone, you actually would receive the phone. It would be hot and active. And that's irrelevant of whether it's an iPhone that you would take and then finish the process in iTunes at home or whether you would have a Blackberry or some other smartphone device that would be activated.

And so, it's really a process that's up and works today. And to the extent that the phones that would be sent out would be hot and activated from the carrier, we believe that's a better experience than having to wait in stores, from Synchronoss' perspective. And so, we do think that that's a good growth opportunity going forward. And we believe -- and a lot of our emerging device work with these consumer-enabled products that may want to be sold on the web, that that would be a compelling feature as well.

Last question. In your prepared remarks you mentioned aggressively pursuing international opportunities. Could you expand upon what would be some optimal opportunities you'd like to pursue?

We're clearly pursuing the communication big service providers in Europe, not just Vodaphone. But also continue to look at good OEM manufacturers in Europe that have a potential to want to provide some type of enablement through multiple carriers.

So, we're pursuing it. We're being targeted and focused around the opportunities that we think could drive the highest amount of transactions, as you're familiar with our model. We need to find the opportunities that can, through investment in the beginning, will generate volumes in the long run that will make it meaningful for everyone. And we're actively going after the logos and OEMs that would come to your mind are absolutely the ones that we're targeting.

Anything on an M&A front internationally?

No, nothing, John. We obviously wouldn't comment on that, but there is nothing there.

Thank you.

At this time I would like to turn the call back over to Mr. Steve Waldis, President and CEO, for closing remarks.

Again, I want to thank everybody for taking time out to join us on our fourth quarter 2008 earnings call, and look forward to keeping all of you up to date going forward. Thank you.

Thank you for your participation in today's conference. This does conclude your presentation. You may now disconnect and have a great day.