Synchronoss Technologies Inc (SNCR) 2010 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the 2010 Synchronoss Technologies earnings conference call. My name is Michelle and I will be your operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. (Operator Instructions). As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the call over to your host, Mr. Lawrence Irving, CFO. Please go ahead.

Thank you, Michelle. Good afternoon and welcome to the Synchronoss third quarter 2010 earnings call. We will be discussing the results announced in the press release issued after the market closed today. With me on the call is Steve Waldis, President and CEO.

During the 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 those listed in our SEC filings, including our most recently filed annual report on form 10-K and quarterly report on form 10-Q.

With that, I'll turn the call over to Steve, and then I will come back a bit later to provide some further details regarding our financials and our forward-looking outlook. Steve?

Thank you, Larry. Good afternoon and thanks for joining us on our call today to review our third quarter results, which were again highlighted by revenue growth and profitability that were above the high-end of our guidance.

Our momentum is being driven by progress against each of our three core strategic growth initiatives. Our longest standing relationships with AT&T remain strong. Our ConvergenceNow Plus+ platform continues to gain traction as adoption is growing across the industry and globe. And we continue to make steady progress with our major Tier 1 cable MSO customers. And, we will be deploying our first ConvergenceNow platform in Europe with Vodafone.

The growing success of our ConvergenceNow and ConvergenceNow Plus+ platforms on a global scale provides us with the solid confidence in our go-forward strategy. We believe our strategy of working and contracting directly with OEMs is helping us win more new customers each quarter, and position us more effectively within our traditional Tier 1 service provider customers. As connected device providers look for ways to activate, synchronize and connect their customers to the digital cloud, our technology stack is becoming very valuable.

At the same time, our ConvergenceNow Plus+ platform also allows major CSPs to horizontally integrate their customers by seamlessly supporting all connected devices and mobile platforms. This enables a stronger connection for our communication service providers to its valuable end consumers, irrespective of the form factor, smart phone, tablet, that they choose to use on the Tier 1 carrier's network.

In a world of rapidly growing adoption, both at the consumer and enterprise level, Synchronoss makes the synchronization management and activation of these connected devises happen, with a very powerful integrated customer experience.

Our solid third quarter results are further evidence of our stronger global market position. Our connected device customer base is growing each quarter, our pipeline of opportunities remains strong, and our core ConvergenceNow platform customer base continues to grow and perform well.

We believe the expansion of our activation and synchronization capabilities are putting Synchronoss in a much better position to capitalize on large and expanding global market opportunities. And as Larry will discuss in a moment, we are again increasing our guidance for full-year 2010, which reflects our strong third quarter results and expectations that we will have a solid finish to the year here in the fourth quarter.

Now, let me provide a summary review of our third quarter results, followed by an update on some of our core growth initiatives.

We reported third quarter non-GAAP revenues of $46.8 million, which was above the high end of our guidance and represents 41% growth on a year-over-year basis. From a profitability perspective, we generated a non-GAAP operating margin of approximately 21%, and a non-GAAP EPS of $0.20, which was also above our guidance and represented growth of 43% on a year-over-year basis.

Now, let me start with an update on the progress on our connected device strategy, which is powered by our ConvergenceNow Plus+ offering. The expanded capabilities of our core activation platform provides leading OEMs, e-tailers and traditional retail stores with a quick and automated way to monetize their connected device offerings in the marketplace.

With the rapid proliferation of mobile software environments, whether you're operating in RIM, Mac, Simian, Android or Windows Mobile environment, Synchronoss is positioned to enable an end-to-end experience, from handset transfer and connect to data backup, through on-device activation capabilities.

We believe our technology stack represents a game-changing experience for consumers and enterprise customers. This powerful new mobile experience is allowing consumers and enterprises to have their own digital identify in the cloud, with the capabilities of distributing the right content and data across multiple connected devices that they choose when they activate on a service provider's network.

Now, given the multiple connected device form factors being used by consumers today, and that many consumers have more than one device, we believe this creates a very powerful and unique customer experience.

Our most significant new connected device customer is Verizon Wireless, which came to us by way of acquisition of FusionOne. Now, during the third quarter, Verizon Wireless reinforced their commitment to scaling FusionOne's technology stack across their subscriber base. And we are in the process of expanding our capabilities to handle significant new additional subscribers, with plans to scale further in 2011.

Given the commitments made by Verizon Wireless and the discussions with them regarding the future direction of our relationship, we began to increase dedicated capital and R&D investments this past quarter. And we will continue to increase investments moving forward so that we can take our combined technology stack to the next level and scale much higher volumes in the years ahead.

We are very pleased at the progress to date working directly with Verizon Wireless and how our business relationship is evolving. And the best evidence of this is our increased investments we are making after close collaboration with our newest significant customer.

Now, one of the emerging benefits of our ConvergenceNow Plus+ strategy is that we are building closer relationships with a broad range of carriers across the US and Europe as we work on behalf of our connected device clients like Dell, Panasonic and others. And as a result, opportunities to leverage our traditional ConvergenceNow platform with Tier 1 carriers is picking up momentum.

Over the past year we deepened our relationship from a technology perspective with Vodafone as we work with them to integrate various connected device providers. And during this past third quarter we also began working on our first ConvergenceNow deployment. This engagement, which started a few years ago in the form of professional services, is our first platform deployment at Vodafone.

Our initial efforts will be supporting enterprise clients with a state-of-the-art e-commerce platform for purchasing and activating mobile handsets. Our initial channel supported will be Vodafone's B2B business in the German market. We are scheduled to move into production with a subset for Vodafone's key B2B enterprise customers during this fourth quarter, and then we plan on expanding the deployment to additional enterprise customers at what likely will be a measured pace. History has shown us that Vodafone takes time with the deployment of new systems, but it's exciting to gain traction, expanding our relationship with one of the largest communication service providers in the world.

Now, in regards to our AT&T relationship, we continue to be pleased with the progress we are making in expanding our platform with our longest standing customer. Our initial efforts at AT&T were focused on the e-commerce channel. And going back to 2007, the introduction of the iPhone provided a significant boost to our relationship.

During 2010, our relationship with AT&T continues to be more diversified, spanning numerous channels and programs beyond our traditional B2C and B2B e-commerce, such as new channels like their indirect e-commerce channel and wireline to name a few.

The expansion of our platform across AT&T also contributed to the elimination of the iPhone concentration in our AT&T relationship as iPhone activations now represent less than 10% of our overall AT&T-related revenue. We feel better about our relationship with AT&T as compared to any point in our nine years of working together, and we look forward to continuing to deliver significant business value and identifying additional ways that we can expand our relationships.

Now, I'd like to finish with an update on our business with our Tier 1 cable providers. As we have discussed on prior calls, we are pushing forward with several strategic e-commerce deployments. I am pleased to report that we went into production with the first stage of our expanded MSO cable deployments during the third quarter. And as a result, we are now in a position to deliver enhanced and more personalized customer experience at many of the leading cable MSOs.

We continue to push ahead with our e-commerce deployment at Time Warner Cable, on top of their wireless initiative that we are also supporting online as well. And finally, we continue to scale our enterprise business platform of ConvergenceNow with Comcast for their commercial Voice over IP business.

Now, to summarize, our third quarter results are strong and we expect to finish the year with continued solid performance. Our AT&T business remains strong; our connected device strategy is gaining momentum. We have expanding relationships with major US and European carriers, and our cable deployments are progressing. On all fronts we believe we're seeing our strategy, customer diversification goals and long-term growth drivers all position Synchronoss for long-term success.

With that, let me turn it over to Larry.

Thank you, Steve. I would like to provide additional details on the third quarter 2010 performance, in addition to our guidance for the fourth quarter and full-year of 2010.

Starting with the income statement, GAAP revenues were $44.5 million for the third quarter. After adding back a $2.3 million deferred revenue writedown from FusionOne, non-GAAP revenues were $46.8 million, which was above the high end of our guidance range of $44 million to $45 million, and up 41% on a year-over-year basis.

The upside in the quarter was driven by better than expected performance from both Synchronoss and FusionOne. Moving forward, we will not be breaking out the performance of FusionOne, as we have integrated the two companies and will be delivering an integrated value proposition.

To provide details in our first quarter of reporting consolidated results, core Synchronoss delivered revenue of $41.1 million in the third quarter, representing 24% year-over-year growth and 10% sequential growth, both of which represent the highest growth during 2010. The upside performance from FusionOne related primarily to revenues associated with Verizon Wireless, which Steve referenced earlier.

Our AT&T-related revenue was approximately $27.4 million in the third quarter, representing 58% of our total non-GAAP revenue, and growth of 24% on a year-over-year basis.

The revenue from our relationships outside of AT&T contributed approximately $19.4 million during the third quarter, representing a record 42% of our total non-GAAP revenue and year-over-year growth of 78%.

The strong growth of our non-AT&T revenue was driven primarily by the FusionOne acquisition, the expansion of existing relationships with Tier 1 cable MSOs, and connected device customers. As Steve mentioned, we are increasing the resources directed at our expanded Verizon Wireless relationship, and we also continue to expand our overall customer base, most notably with the new Vodafone platform agreement.

From a revenue mix perspective, 72% of our third quarter non-GAAP revenue came from transaction process. The remaining 28% was generated from professional services, subscription services, and licenses.

Turning to cost and expenses, we will review our numbers both on a GAAP and non-GAAP basis. Our non-GAAP results add back the deferred revenue writedown associated with FusionOne, fair value stock-based compensation expense, acquisition related costs, restructuring charges, deferred compensation expense related to earn-outs, amortization of intangibles associated with acquisitions, and excludes a change in our contingent consideration liability. There is a reconciliation table between the two in our earnings release.

Non-GAAP gross profit in the quarter was $24.8 million, representing a non-GAAP gross margin of 53%. This represents an increase from the 51% to 52% range for the first half of the year, and was driven primarily by the addition of FusionOne Solutions, which carry a higher gross margin.

Gross margins on the core Synchronoss business were still impacted by numerous investments made to onboard new programs, particularly the e-commerce deployments with cable providers, and are still in the early stages of moving into production and ramping automation.

Non-GAAP income from operations was $9.6 million in the third quarter, representing growth of 30% on a year-over-year basis, and non-GAAP operating margins of 21%.

The Company's tax rate for the quarter was 36%, leading to a non-GAAP EPS of $0.20, which is up 43% year-over-year and well above our guidance of $0.16 to $0.17. The increase was the result of revenue upside in the quarter and a lower tax rate. The lower tax rate resulted in a non-GAAP EPS improvement of $0.01.

On a GAAP basis, income from operations and net income for the quarter were $2.8 million and $2.1 million, respectively. The resulting GAAP diluted earnings per share was $0.05.

Let me review some of the primary GAAP charges during the quarter, which are excluded from our non-GAAP results.

As discussed a moment ago, there was a $2.3 million deferred revenue writedown to FusionOne that we added back to arrive at our non-GAAP revenue, which is consistent with the methodology we shared at the time of the acquisition.

Stock-based compensation expense was $3.2 million in the quarter.

There were $2.4 million of professional services associated with the closing of the FusionOne acquisition, that we do not view as recurring.

We incurred $335,000 of restructuring charges associated with the consolidation of FusionOne into Synchronoss operations during the third quarter.

There was $525,000 in amortization of intangibles associated with the acquisitions during the quarter. This is a recurring non-cash expense that we will exclude from our non-GAAP results moving forward.

Finally, there is an adjustment of approximately $2 million for the contingent consideration obligation. This adjustment was a benefit to our GAAP results and excluded from our non-GAAP results.

During the third quarter, FusionOne exceeded our expectations for non-GAAP revenue and profitability. However, the FusionOne earn-out was structured in a way to provide a higher level of payout if certain other metrics were exceeded. There may be positive and negative fluctuations in this adjustment on a quarterly basis that are difficult to forecast; but again, they will be excluded from our non-GAAP results.

The most important part, from our perspective, is that we are very pleased with the performance of FusionOne and the core set of customer relationships that they brought to Synchronoss, particularly Verizon Wireless.

Looking at our cash, total cash, cash equivalents and marketable securities of $72.5 million was down approximately $30 million from the end of last quarter due to the acquisition of FusionOne.

With that, let me turn to the guidance for the fourth quarter and full-year 2010. We are currently forecasting total non-GAAP revenues in the range of $48 million to $49 million for the fourth quarter, represent year-over-year growth of 35% to 38%.

We are targeting non-GAAP gross margins in the 56% to 57% range during the fourth quarter. The sequential increase in margins expected to come from having FusionOne for a full quarter, in addition to incremental benefits that the newer programs have recently moved into production.

We expect non-GAAP operating margin in the range of 21% to 22%, which not only assumes continued investments in R&D and sales and marketing, but also includes increased investments related to new customers that Steve mentioned earlier, Vodafone and Verizon Wireless in particular. Importantly, the reason we are investing is because of projects in hand. We are not investing with the hope of winning customers down the road.

In addition, even with our increased investments, our fourth quarter profitability expectation is in the range of our previously announced implied fourth quarter guidance. In particular, we are forecasting non-GAAP EPS of approximately $0.20 to $0.21 for the fourth quarter, assuming a tax rate of approximately 38% and a diluted share count of approximately 32.6 million shares.

Turning to the full year of 2010, we are increasing our forecast for both non-GAAP revenue and profitability. We are currently targeting non-GAAP revenues in the range of $167 million to $168 million for 2010, which represents annual growth of approximately 30%.

From a cost and profitability perspective, we are targeting full-year gross margins between 53% and 54%. We are currently targeting full-year non-GAAP operating margins at 21%, with non-GAAP EPS of approximately $0.69 to $0.70, which is an increase of approximately $0.04 compared to prior guidance and assumes a tax rate of approximately 38% and a diluted share count of approximately 32.4 million shares.

In summary, our third quarter results were better than our expectations. We have increased our full-year guidance. The Company is executing well against each of our three key growth drivers -- AT&T, our carrier and cable MSO deployments, and our connected device strategy. All these initiatives have made significant progress in diversifying our revenues and customer base.

With that, let me turn it back to the operator and we'll begin our Q&A.

(Operator Instructions.) Your first question comes from Tom Roderick of Stifel Nicolaus. Please proceed.

Hi, guys. Good afternoon.

Hey, Tom.

Hey, Tom. How you doing?

Good, thanks. So, I wanted to start -- I guess we've got a number of updates in progress to go through, so I wanted to start with the Verizon relationship. And maybe, Steve and Larry, if you could just talk a little bit more about where you're placing investment dollars, into what types of projects. I guess what I'm trying to get a feel for, is this an extension to the relationship on the FusionOne side, or does this potentially move you into an environment where you can -- much like you did with Vodafone, be on the ConvergenceNow side with Verizon going forward?

Yes. So hey, Tom, this is Steve. So, one of the things that we've been very happy about in our early discussions with Verizon is the capabilities that we think we can provide for them on an ongoing basis.

Clearly, the cornerstone of technology that they've embraced is through our acquisition of FusionOne. And our biggest efforts, really, in terms of really getting both the infrastructure in place, the application in place to provide the scale that we believe will be coming down the road. And so, the combination of those factors give us a lot of confidence that, although it's early on in the relationship, that we see good potential in this new partnership.

And to that point, Steve, I mean, how should we think about the timing? I know these big ones can take a long time. But, if there were to be an event for Verizon that they had particularly one specific transaction type that had a lot of volume behind it, would that itself be a catalyst, or should we think about this as slow and steady and gradual over a few year time span?

It would be hard to speculate, Tom, on anything that may happen in the future. But one of the things that's obvious in our business discussions with Verizon is that we believe that it's in our best interest to have the best development structure, like we've done with all of our other large clients, in order to accommodate the capabilities that we bring to the table, as well as the commitments that they've brought -- that they've initially bought under the FusionOne umbrella.

And the combination of both of those, along with discussions with them, give us the confidence that, clearly, we're expecting that relationship to become material. Whether that -- it's hard to predict exactly when that would occur in terms of different quarters. But clearly, we -- from what we've seen to date, we believe that it's trending in that direction.

Okay, great. A last one from me. In thinking about the implication of your rollout with some new heads and the R&D resources in Ireland, I guess -- you may not have reported it in your press release, but I think the IDA was quoting a number of 50 heads being brought online over there for you. So, can you talk about what sort of margin implications that might have into 2011? And are those bodies, are they going to be needed just specifically for Vodafone or is there other entities in the pipeline coming down the pipe that we ought to think about?

Okay. Thanks, Tom. I'll answer the first part around the relationship and then I'll let Larry address the margins here in a second.

One of the things that we notice and that we've talked about in the past is the ConvergenceNow Plus+ opportunities really became almost global for us instantly, with a lot of our clients like Dell, Panasonic and others, really brining us into the European market, and as well as the US market.

As you're familiar with, the European market has -- is much more open when it comes to devices, such as companies like Carphone Warehouse, etc., that sell devices and that use that over multiple networks. And it was a combination of that, along with some of the success that we have clearly with Vodafone, that we believe that we've been prudent in making investments internationally, but we start to see that the international market is really picking up for us.

And so, clearly, between the relationships that we've already brought on board and the ones that we believe we'll be rolling out here in the next year or two, we felt it was really important to have presence in Europe to handle that revenue stream as we start to scale that.

Yes. And Tom, from a margin perspective, it's just an extension of our R&D development dollars today. And it's just an extension of that team that gives us the presence in Europe, as Steve just pointed out. And it's really integrated into our total development and our total roadmap. And so, really, from an R&D perspective, we do expect to continue to increase the spend there. But overall, kind of inline with what we expected going forward.

Okay, perfect. Thank you, guys. I appreciate the help.

Your next question comes from Tom Ernst of Deutsche Bank. Please go ahead.

Good afternoon, gentlemen. Thanks for taking my questions.

Hey, Tom.

So, in follow-up to that question, you highlighted as well in your call that you're investing a year ahead for both Vodafone and Verizon. And so, obviously, that's always good news whenever you're doing this because, when you're investing ahead, it's the bigger new deals.

What magnitude of cost investment here is necessary in the short term? And should we expect that those two deals require negative net income as we look early into 2011 as well, or when do you think they'll turn to positive EPS accretion?

We don't talk about specific customer relationships in terms of how that impacts us. From an R&D perspective, we're definitely increasing the R&D spend. I mean, I do see that somewhere in the neighborhood of about 16% of our revenue dollars going forward.

Overall, I mean, you heard the guidance that we provided in terms of where we thought the bottom line would be for the fourth quarter. So, we don't really see that impacting us on a go-forward basis in terms of negative impact. Certainly, it does allow us to build enough scale so that when the transactions that we have for these particular accounts begin to grow, we would grow with it. So, it's a good investment in the sense that it allows us to scale with those customers moving forward.

Okay. And we know that you -- you've got greater potential, I believe, at both those accounts, or do you think that this is all we're likely to see in terms of these two major new wins? Or any future potential you see in the short term?

We feel -- I mean, it's obviously hard to speculate in these large accounts the timing of such progression. But one of the things that's been encouraging, and I think, Tom, you noted it, is we've had a good track record of investing in areas that we think will scale for us. And clearly, both the opportunities at Verizon and Vodafone are very appealing to us. And we believe in our early discussions at both of those accounts that, as we progress and deliver and move some of these things into production, that there'll be good opportunities for us to really scale those relationships. And so, because of that, we are making the investments ahead of the curve.

That being said, obviously, we need to -- history shows, especially in Europe with Vodafone, things have a tendency to happen more at a measured pace. But nevertheless, the success that we've had in the connected device strategy in Europe, now pouring over here into our ConvergenceNow core products, we feel good about that trend. And we see a pipeline of opportunities that could continue to move us down that direction, both here as well as in Europe.

Alright. Thank you again.

Thanks, Tom.

Thanks, Tom.

Your next question is from the line of Scott Sutherland of Wedbush Securities. Please go ahead.

Great. Good afternoon, guys, and good job on the quarter.

Hey, Scott.

I'm going to be dwelling on the same two things. Maybe digging a little bit more on Vodafone. Was this a group decision? And is there opportunity, you think, more near-term to go to other countries, or is it to go to more channels within the Germany operations?

Yes. I think, Scott, it was a combination of both group and local work that we've been involved in. I think that the short answer is both have good opportunities. First, I think one of the things that we've proven here at Synchronoss over time is that we've got a really good track record for execution in different channels. And once we're able to do that, it makes logical sense, based upon our business model, to expand it out.

So, we see the potential there, clearly. Obviously, that's got to be earned. That's something that we need to take gradual steps in. But it puts us, in our opinion, in the door in some critical areas that, if we can demonstrate what we know we're capable of doing, those opportunities can come our way.

Okay. On Verizon, trying to get at what Tom was getting at. When you look at the technology you guys have for InterconnectNow, the onboarding for Dell and other connected devices and the FusionOne platform, what's reusable or what can you use within that platform to ramp up if a deal gets done on activation and provisioning of devices?

So, we are clearly making investments in all areas today through our connected device clients, right? We have connections from an activation perspective into Verizon for some of our clients who resell their services here in the US. The FusionOne platform needs to be enhanced. And one of the things that we're working on is building the scalability and making the investments that Verizon would expect of us to make.

And so, when we look at kind of critical areas of the business, one of the things that I think is unique is the fact that a lot of the OEMs in the marketplace today, whether it's RIM, whether it's Android, Mobile Seven, all are trying to vertically integrate their customers.

What we're finding is that Synchronoss is a very valuable value proposition to carriers, is that we're getting horizontally aligned with them. So, we're allowing that digital cloud and you as a customer to move from operating systems in and out seamlessly, both in a retail store or online. And we expect to have an end-to-end solution that allows you to not only activate, but move in and out of various different devices, which you can see is very appealing to the larger carriers where the individual OEMs will obviously have you, so to speak, get married to their individual stacks.

And so, I think it's really, from a strategic perspective, put us, I think, in a really nice seat to be able to see that equation and be involved in both ends of that value chain.

Okay. Lastly, a quick financial question for Larry. Was cable greater than 10%? And what percentage of revenue was Verizon, if greater than 10%?

So, we haven't broken out either one of those groups. So, once Verizon becomes a 10% customer for us for a full year, we'll disclose that at that time.

Okay, great. Thank you.

Your next question comes from the line of Shyam Patil of Raymond James. Please go ahead.

Hi, good evening. Congrats as well. Steve, could you talk a little bit about connected devices in terms of the revenue you guys are expecting maybe next quarter or looking out to next year given the -- given hindsight to the ones you've signed over the past several months?

Okay. So, I think in the short term, one of the things that's been central to our connected device strategy has been being able to get the majority, certainly, of the individual OEMs or device guys to not only use your software as a way to connect and activate, but to really look at different footprints. And you've heard us talk a lot about really having a solid footprint which we've established here in the United States, and a solid footprint in Europe.

And the challenge in that model, to answer your question, is really figuring out, of the device wins that we have, which one of those device wins are likely to drive volume. It's harder to predict on an individual basis, except for maybe a few devices. But, when you have a majority of the top selling devices in the region, you get a higher degree of assurance that that transaction volume is something that you can count on when you look for the revenue growth.

But, what is giving us extra confidence in the revenue growth there is, at the same time, ConvergenceNow Plus+, both at Verizon Wireless as well as Time Warner, allows us to essentially have the service provider, who has multiple transactions across multiple devices and operating platforms. And that dynamic allows us to capture more market share, like we've traditionally done in our business.

So, when you look at the combination of those two, I think the key metrics that we've been focused on is really expanding our footprint within regions, which we've done here in the US and Europe; expanding the number of logos that are counting on us each quarter to transact those, which we're doing; and then, ultimately, get the leading providers in those territories or regions that we're in to use our technology.

When you look at that, you're capturing kind of both ends of that equation. And because we're seeing that happen, you're starting to see that growth in the underlying business as it relates to connected devices.

Got it. Okay. And then, going to -- back to Vodafone. When you look at the e-commerce business that Vodafone currently has, do you have any sense as to the number or the percentage of growth adds, either at Vodafone or in general in Germany, that come from, say, the Web and how that compares to the US, just to maybe get a sense of the opportunity there?

Yes. Well, it's clearly, without giving specifics in some of our conversations that we're under NDA with Vodafone on, that clearly -- there's a market that they believe they can transact more, and that there's a push in those markets for them, especially in the enterprise customer space, to want to do more over the Web and want to do more online.

And so, we think that the opportunity is very similar to what we see here with some of our cable operators in the US, where they'll typically be in that single digit range, and then really have some plans to put the right technology in place and the right offers on the Web, and that will drive that into double-digit growth.

And I think it's safe to assume that when you look at the various different European carriers that we've been working with, either directly or indirectly with, that they definitely see the opportunity to do that. Why? Higher conversion rates, lower costs, and it provides this level of intimacy with their customers that could really separate them in each of the markets, as their competitive environment kind of steps up here with the different players in each of the markets they serve.

Got it. And then, on FusionOne, when you guys initially made the acquisition you talked about seeing faster growth in FusionOne than the core Synchronoss business next year. Could you talk a little bit about what that growth is based on? Is it based on kind of the current book of business and expanding -- increasing penetration at Verizon Wireless, or is that predicated on new wins? Could you just talk about that a little bit?

Sure. We think, first off, that they have a very solid -- and had a very solid relationship with Verizon Wireless. And so, we believe with our experience scaling with other large providers that that would give us an opportunity, clearly, to grow that. And in the conversations that we had prior to the acquisition and then since the acquisition, we've -- that philosophy's only been reinforced by the client directly.

But at the same time, we also see a lot of interest in that technology. In the acquisition of FusionOne we picked up over 51 patents in the synchronization space. And we see opportunities from both existing customers and new customers that would have an interest in using that technology.

So, we kind of have a nice base with their existing relationship with Verizon Wireless. But clearly, early to tell in terms of how quickly they'll develop. But certainly, a good pipeline of opportunities in being able to leverage that.

And then, when you combine that with what I think is a very unique value proposition, which is what we call our Lights Out Activation End-to-End Process, where you go on, turn your device on, activate it, sync your content transfer regardless of the form factor. I think that's a big value add that we're seeing both for consumer and enterprise customers, that we're not seeing a lot of folks that could replicate that type of technology stack.

Great. And then maybe I can sneak one more in. It looks like this quarter you guys posted organic non-AT&T growth of about 25% year-over-year. And I think you'd initially -- well, I guess last quarter you guided to about mid-20s organic growth from non-AT&T for the year. Do you guys -- is that -- are you guys still on track to hit that number?

It's -- the best way to look at it is we're growing our revenues outside of AT&T significantly together. It's hard once we combine the two together but, as we said -- as you said earlier, we're not breaking out guidance separately for FusionOne. But we came in the 25% of non-AT&T revenue in this quarter and we expect to continue driving that revenue going forward.

Great. Thank you.

If there are no further questions, I would now like to turn the call back over to Stephen Waldis, CEO and President, for closing remarks.

Thanks again for everybody joining us here for our third quarter earnings call and we look forward to speaking with all of you soon. Thank you.

Thank you for your participation in today's call. This concludes the presentation and you may now disconnect. Have a great day.