Synchronoss Technologies Inc (SNCR) 2012 Q3 法說會逐字稿

Good day, ladies and gentlemen. Welcome to Q3, 2012, Synchronoss Technologies, Inc. earnings conference call. (Operator Instructions).

I would like to turn the all over to Mr. Lawrence Irving, Chief Financial Officer. Please proceed, sir.

Thank you. Good afternoon and welcome to the Synchronoss third quarter,2012, earnings 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, founder and CEO. During the call, we will make statements related to our business that may be considered forward-looking statements on the federal security 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 variety of risks and uncertainties that could cause actual results to differ materially from expectations.

For a discussion of the material risk 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 our quarterly report on Form 10-Q. 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. Steve?

Thank you, Larry. Good afternoon. And thank you for joining us on our call today to review our third quarter financial results, which were inthe upper half and at the high end of our guidance. Our non-GAAP revenues were $69.2 million, representing 17% growth on a year-over-year basis. From a profitability perspective, our non-GAAP operating margin of approximately 27% led to a non-GAAP EPS of $0.28, which was at the high end of our guidance.

Our 2012 has been an exciting time for Synchronoss. We have made significant progress across a number of our key growth initiatives. Most important is we continue to make solid progress in our mobile content cloud strategy as evidenced by our expansion at Verizon Wireless, and our new wins at Telefonica. In addition, we recently moved forward with our initial cloud deployment with AT&T, which while very early may represent an initial stage in opening a major new long-term growing opportunity for additional cloud services with our largest customer. And we made solid progress advancing our activation services platform in Europe with our previous announcement of additional countries that we would be supporting via Vodafone.

Now, as many of us located in the Northeast are well aware, the impacts of Hurricane Sandy have significantly disrupted basic power and telephony service. Many of our Tier 1 customers are focused on getting back essential telephone services to their customers. This remains, as it should be, their top priority. As a result, we do not expect some of our normal professional services work to move forward and be completed before the holiday season starts in which carriers lock down any changes to their networks. In addition, we believe it's prudent to use the low end of certain customer forecasts for expected volumes as compared to our previous expectations due to distractions and challenges these customers are facing in the aftermath here in the Northeast of the hurricane. Now, given this situation and the continued uncertainty at the time of the call, we're adjusting our view for the fourth quarter, which Larry will detail in a minute. And while these natural events have created some near-term variability, all of our key initiatives continue to move forward as planned, and we remain very positive on the future of Synchronoss based on the breadth of the programs we have in place with our major Tier 1 operators.

In 2012, most mobile operators began the process of determining what role the cloud could play in their ecosystems, and how they could deliver in scale a growing number of Cloud services over the long run. Many operators got started by trying to solve a point solution in the cloud with varying degrees of success. As a result of these events, it has become increasingly clear to mobile operators that over the last year that you must have an end-to-end platform as a minimum requirement to meet consumer demands for a more integrated, seamless, and scalable experience. We have worked hard to establish Synchronoss as the most reliable and scalable option for these requirements.

Our success is evidenced by the fact that we have four of the world's largest mobile operators as customers. And given the size, complexity, and strategic importance of these cloud strategies for our operator customers, most of the focus in 2012 has been developing a go-to-market plan and picking a comprehensive cloud platform. With solutions of this size and scope, the need for a flawless implementation and user experience is critical for both the mobile operator and Synchronoss, given our revenue model and our future growth is based on successful adoption levels.

Now for our part, we continue to increase investments to ensure our four mobile operator wins are successful including the deployment of our platforms, and in the first or second quarter of 2013 the timing of which depends on specifics of each customer implementation timeline. And as we move into production, we expect 2013 to be the year in which mobile operators begin to scale these deployments. This includes launching pilot marketing programs around how to best position and monetize the cloud. Now, as mobile operators learn and tweak their pricing, packaging, and promotions, we expect new and comprehensive campaigns will be launched by them in the second half of 2013 that will drive increased adoption. At the same time, Synchronoss will begin to go on an installed, growing number of devices to market in the second half of 2013 with these operator networks. So we are very encouraged with the development of our market opportunities.

During 2012, we have seen the initial adoption of comprehensive cloud platforms and flushing out of carrier cloud strategies. As we look to 2013, we see carriers moving into production with cloud platforms, fine-tuning their go-to-market strategies, and then ramping adoption. Then, in 2014, we begin to realize the full potential of the cloud growth as all the platforms and marketing programs and devices are in place and at full scale for the entire year. Now, during this past quarter, we made solid progress against each of our strategic customers that are deploying cloud services at Synchronoss. At Telefonica, we are scheduled to deploy our platform in early January to support their efforts in the Spain customer market.

In addition, based on the success of our efforts to date, we believe there are additional opportunities in other geographic territories and channels at Telefonica, and we are investing now resources to make sure we capitalize on these new, additional opportunities. At AT&T, we advanced the implementation of our initial cloud content services rollout as AT&T deployed the Synchronoss platform on a range of cloud services. Together we are in the process of bringing these solutions to multiple channels beginning at the end of 2012 and continuing through the first half of 2013, which we believe is a powerful combination of our total capabilities. We believe this is an encouraging sign on the strategic important AT&T is placing on the cloud and our ability to continue expanding our relationship with AT&T. At Verizon, we made tremendous progress in building out the infrastructure necessary to support the rollout of the consolidated cloud services next year. Now, this is a complex infrastructure built out that is designed to handle significant scaling of subscribers as adoption rates ramp over the course of 2013.

We continue to focus our resources and efforts on a targeted go-live date around the end of first quarter, 2013. Now, this plan assumes all the recent issues caused by the storm in the Northeast are corrected in the next few weeks. We believe the ability to combine our network address book with social, video, photos, messaging, and other forms ofcontent management will create a compelling cloud experience for Verizon subscribers.

As a reminder, we anticipate our annualized cloud services revenue run rate with Verizon will not scale until after we have move into full production and devices are launched into the market with our software and buy-ins rampIrrespective of the specific timing just mentioned, there is no change to the view that the annual run rate associated with these cloud services will scaleto $70 million of annualized revenue run rate in the twelve months following the platform launch. And at Vodafone, we continue to move forward with both our cloud-based content management platform in the Netherlands, and scaling our new activation services in the countries we announced last quarter.

Our four major mobile operators now have more than 50% of the mobile subscribers in the market that we currently serve. This provides Synchronoss with a tremendous long-term opportunity as the growth and proliferation of mobile devices continues to ramp. And as a result, we will continue investing in R&D to build out the capabilities of our platform in addition to capital investments that ensure we're able to handle the massive scale. And finally, it's worth noting that our AT&T activation business had a solid performance for the quarter contributing 7% sequential revenue, and 8% year-over-year revenue at AT&T.

The iPhone 5 becoming available on September 21 generated a record number of pre-orders. We believe we are tracking with well within our 5% to 10% revenue growth guidance for AT&T for the full year 2012, and we believe there is a good opportunity for continued growth with AT&T as we look ahead. So to summarize,we made significant progress against multiple growth in the quarter. We are working towards the successful cloud services management role at Verizon that will substantially increase our revenue run rate with them.

We are successfully expanding our AT&T relationship into the cloud and content services. And we are on track to significantly scale our relationship with both Telefonica and Vodafone. Now, in closing, I would like to share a special thank you to my Synchronoss team.

With our headquarters in New Jersey, and principal operations in eastern Pennsylvania,we have had many employees endure very personal hardships since Hurricane Sandy. Despite these setbacks, our dedicated employees have done a tremendous job from an execution perspective in the most difficult of times; and I'm greatly appreciative of the efforts each and every employee has given to the Company. With that, let me turn it over to Larry.

Thank you, Steve. I will focus my comments in two primary areas. First, I will review our third quarter of 2012 financial results, which met our guidance. Second, I will review our updated guidance for the full year of 2012. From an overall perspective, this was a quarter focused on executing on programs of a number of important, strategic customers with significant long-term upside potential.

At the same time, we demonstrated the ability of our business model to scale by delivering non-GAAP operating margin that remained at the highest level in four years. We believe we have the opportunity over the long-term to continue to be a large, growing, and highly profitable company. With that overview, let me provide additional details on our third quarter financial performance. Starting with the income statement, GAAP revenues were $69.2 million for the third quarter. Non-GAAP revenues after adding back $232,000 of deferred revenue writedowns from certain acquisitions was $69.2 million,which was the upper half of our guidance and up 17% on a year-over-year basis.

Revenue from our customer relationships outside of AT&T contributed approximately $37.2 million during the third quarter, representing 54% of our total non-GAAP revenue and year-over-year growth of 25%. The most significant contributor to our non-AT&T revenues was Verizon Wireless, which again represented more than 10% of our revenue for the quarter. Our AT&T related revenue was approximately $32 million in the third quarter,representing approximately 46% of our total non-GAAP revenue and growth of 8% on a year-over-year basis.

As expected, our AT&T revenue increased 7% sequentially due in part to increased volumes associated with the launch of the iPhone during the quarter. As we look ahead to the fourth quarter, it's important to keep in mind that our AT&T revenue is up against very difficult year-over-year comparisons. The new iPhone was launched in the fourth quarter of 2011 as compared to the third quarter this year. In addition, our new customer care channel experienced a strong, initial ramp in the fourth quarter of 2011 and is at a lower level in the fourth quarter of 2012, as we focus on handling a more highly automated transactions through this channel. As such, it's our expectation that AT&T will be down slightly both on a sequential and a year-over-year basis in the fourth quarter.

Nonetheless, we have grown our AT&T revenue by 12% on a year-to-year basis and are tracking to deliver full-year AT&T revenue that is in the 5% to 10% growth guidance range for the full year of 2012. As Steve mentioned, we believe our new win for cloud services at AT&T is a new long-term growth opportunity as well. Further on revenue mix, 72% of our third quarter non-GAAP revenue came from recurring sources, namely transaction processing and subscription arrangements. While professional services and licenses made up the other 28%.

Turning to costs and expenses. We'll review our numbers both on a GAAP and non-GAAP basis. There's a full reconciliation table between the two in our earnings release, which can be located under the investor relations section of our website. Non-GAAP gross profit in the quarter was $42 million, for a gross margin of 60%. This represents nearly 400 basis points of gross margin expansion on a year-over-year basis due primarily to carriers adopting and scaling our cloud-based services. Non-GAAP gross margins was within our long-term target model range of 60% to 62% though it was at the lower end in the third quarter.

As we have historically highlighted, gross margins will have a certain degree of volatility driven by revenue and labor mix. Non-GAAP SG&A was $7.6 million or 11% of non-GAAP revenues, down from 12% in the year-ago quarter and down from 13% last quarter. R&D was $11.1 million or 16% of non-GAAP revenues, also consistent with the year-ago quarter and down from 17% last quarter. As mentioned in our previous discussions, we continue to expect R&D expense to be higher than our historical advantage as we execute against our road map of new solutions with our strategic customers.

Non-GAAP income from operations was $18.4 million in the third quarter, representing growth of 40% on a year-over-year basis and an operating margin of 27%, which is up from 22% operating margins in the year-ago quarter. Our non-GAAP tax rate for the quarter was 41.3% which led to a non-GAAP EPS of $0.28 which was up 22% on a year-over-year basis and at the high end of our guidance. Several discrete items and the mix of taxable, geographical income negatively impacted our overall tax rate. In addition, as we have discussed in previously conference calls, the lack of new tax legislation regarding the use of R&D tax credits continues to impact our overall tax rate for the current year compared to last year.

On a GAAP basis, third quarter gross profit was $39.8 million. Income from operations was $11.2 million, and GAAP fully diluted earnings per share was $0.16. Looking at our cash. Total cash, cash equivalents, and marketable securities was $132.6 million,up $9.6 million from the end of last quarter. We generated $20.2 million in non-GAAP cash from operations, which was up from $16.7 million in the year-ago period. Non-GAAP cash from operations excludes the payments for additional purchase price for acquisition or announced, and the excess tax benefit of exercising of stock options. Capital expenditures were $3.5 million, down from $4.7 million in the year-ago period.

Our capital expenditures were down significantly in the third quarter due to an acceleration of CapEx spend during the second quarter of 2012. We continue to expect our capital expenditures to come in at approximately15% of revenue for the full year of 2012. Other things being equal, in 2013, we expect capital expenditures to return to approximately 10% of revenue that we have targeted in the past. With that, let me turn to the guidance starting with the fourth quarter.

Turning to the fourth quarter of 2012, we're currently targeting non-GAAP revenues in the range of $68 million to $72 million. As Steve indicated earlier, the challenges created as a result of the hurricane in the Northeast is expected to have an impact on our business during the fourth quarter, including our normal professional service work and volumes levels associated with some of our longer-standing programs. As a result, we do not believe it's prudent to expect that Synchronoss will achieve the upper end of the guidance range we established prior to the hurricane. Due to this uncertainty, we're providing a wider range than in previous calls.

From a profitability perspective, we're targeting fourth quarter non-GAAP gross margins in the 60% to 61% range. We expect to generate non-GAAP operating margins of approximately 23% to 25%. And while the recent storm presents near-term challenges, we continue to increase investments, particularly in R&D and deployment resources, as we look to accelerate the build-out of our mobile content management cloud platform to capitalize opportunities with our four large customers. We expect non-GAAP EPS of approximately $0.23 to $0.27, assuming a tax rate of approximately 42% and a diluted share count of approximately 39.3 million shares.

Taking our nine-month actual results along with our fourth quarter guidance, this translates into our full year results as follows. Total non-GAAP revenues in the range of $269.3 million to $273.3 million, representing growth of17% to 19% on a year-over-year basis. From a profitability perspective, we expect a full-year non-GAAP gross margin in the 60% to 61% range along with a non-GAAP operating margin of approximately 25% to 26%. We are now targeting non-GAAP EPS of $1.05 to $1.08, assuming a 39% estimated full-year tax rate and a fully diluted share count of approximately 39.3 million.

In summary, Synchronoss delivered solid third quarter results. Looking ahead, we believe our expanding cloud services business with Verizon, Telefonica, and now AT&T, combined with our expanding relationship with Vodafone, are positioning the Company well for attractive, long-term growth. In addition, our results in the third quarter as well as our year-to-date performance speaks to the operating leverage in our business as we scale.

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

Thank you. (Operator Instructions). First question, from Stifel Nicolaus. Please go ahead, sir.

Hey, guys. Good afternoon. So maybe I could just press on the issue of Hurricane Sandy a little bit more and how, just as a matter of course, this is impacting operations of what needs to happen to your operations on a day-to-day basis to get back up on line. Maybe walk through how exactly the storm impacted it, how your data centers were impacted or not at all if that was the case, and what you're relying upon from your own internal resources versus resource of your customers to get the transactions level back up to normal levels.

Sure. Hey, Tom, it's Steve. Let me address the second part of your question. In regards to our infrastructure, we performed flawlessly in term of our ability to support our customers during the events. Obviously we had movements from work around in different locations, but ultimately our infrastructure remained very solid. As it relates to our customers, obviously the priority becomes very quickly restoring service. In order to do that, they move a lot of roles at their locations. And those are people that we deal with on a daily basis that would typically work with us in implementions of some of our road map and some of our professional services work.

So when you combine that along with some of the challenges that even as we sit here tonight, are still not fully resolved in the region, we just think that it's prudent to be able to assume that some of that may not get done before the holiday season. It's important to indicate that most of our service providers will lock down any changes to the network, roughly about a week or so before the Thanksgiving holiday for obvious reasons. It's their busiest time of the year. So your window of getting those services completed and accepted becomes very small.

Okay. So, hence the reason for the wider level of guidance in that you'vegot a tight window to get all these network changes locked down ahead of Black Friday and all the holiday shopping, right?

That's right. And I think for them to sit back and access what they could do with us right now, to be blunt, they have bigger fish to fry right now than that.

Understood. Okay. And looking out, and it's obviously in the context of the fourth quarter uncertainty. Too early to ask for 2013 guidance, but I would be interested if you can provide some directional commentary around the timing of the Verizon launch, how that sort of fits relative to your prior expectations and when you talk about a $70 million-plus annualized run rate, how long do you think it will take to get there relative to this project going live at the end of Q1, 2013.

Sure. Well, Tom, I'd say that nothing has changed in terms of our operating plans. It still remains consistent to deploy at the end of Q1. I think what's true of Verizon but more of a holistic across all of our new providers is in 2012, there was a lot of feeling out strategically what cloud strategies made the most effective ways to monetize and maintain a very personalized relationship with their customers. Heading into 2013, there's a lot of promotions that are happening now in which they're looking at different ways to roll out these services, and what are seeing across the board is that you will see typically in the first half of the year, as the deployments out, the devices will then be shipped and the promotional elements will be worked out.

And so we are seeing across our four providers an inflection point where we start the see the -- let's say it takes a quarter, so once you deploy to start to get on the devices in productionthat the latter half of 2013, you would start to see that start to append to these devices. And obviously you would start to see the scale as adoption rose. And then, ultimately, when you get into 2014, most of the carriers today that we're dealing with really expect to have it deployed in 2013 and have their promotions fully rolled out. When you look at it from a full-year perspective, that's when I think everything really comes together.

Okay. Thanks, Steve. I'll jump back in the queue.

Thank you. The next question from Thomas Ernst of Deutsche Bank. Please go ahead, sir.

Hi. Good afternoon. Nandan Amladi on behalf of Tom. Just a question on the AT&T. The various projects you have going on. Last quarter, you talked about a new speech project that you had begun work on. How it progress on that going, and relative to the content side of things with AT&T, how much priority is the speech project getting versus the other? --

We got you. So, the speech project continues to move ahead as scheduled. We are pleased with the results we had talked about, getting some initial trials launched in this previous third quarter, which did happen. That continues to move forward as expected. On the cloud management side of it, when we spoke before, we had a proof of concept type of idea on how we could use cloud services in an innovative way with AT&T based on our total capabilities that we provided for the previous few years. That has then subsequently resulted in some success.

Now we're moving forward to get on some of the devices that we'll roll out and become a little more visible to the marketplace at the beginning of next year as we combine our total capabilities on the cloud management side. So in the short-term, they both have a lot of focus. I would say on the speech side of the equation, it's a very effective way to reduce costs and that continues to be a value add for all of the providers. On the cloud side, it's a great way to retain customers in a very innovate way. And I think we're very pleased, although it's very early, we're very pleased with the results out of the gate with our work there at AT&T.

Thank you.

Thank you. The next question is from Scott Sutherland with Wedbush Securities. Please go ahead, sir.

Great. Thank you and good afternoon.

Hey, Scott.

So I want to get back to the professional service and the impact of that. First of all, it was down in the Q3 which didn't have a Sandy impact, and your transactional services were up a lot sequentially. Was that just timing of launches or what drove the two directions of those two line items?

If you recall, last quarter, we talked about really moving the transactions up in the second half of the year and that's what's happening. You're seeing that occur here in the second and the third quarter. Hopefully that continues here into the fourth quarter. We did mention that we're doing the lower end of the guidance in terms of the volume. The real driver was, as expected, that we would have more transactions in the second half of the year.

And the professional services, was it just that Q2 was high?

Professional services was high but we realized the normal amount of professional services that we would have in a particular quarter. From our model, we've always said that professional services would range anywhere from 20% to 25%, and we're pretty close to that here in Q3.

All right. When you look out to getting the timely Verizon launch, and obviously, I understand that your top two customers are in that region, so that was the big impact. But to get them to a timely launch, do we expect there to be some catch up on the professional services and implementation services in Q1 to get them out still in March or April time frame?

It's too early to tell how that will play out. Certainly that work that was scheduled will be completed. Whether that's moved around over the course of the year all done in one quarter remains to be seen. Each quarter, we prioritize our road map with our customers to deploy it. As we sit here tonight, it's unclear how that will play out. How much may indeed get actually done this year versus what will be done for next year, but given where we are in the process and where our customers are, we assume some of that will get pushed out.

Okay. My last question is,you mentioned in prepared comments about other opportunities with Telefonica. And we have also seen some build out of your resources in Latin America. Are you focused on Telefonica in Latin America and the near region? Is it more Latin America? Or do you see other opportunities in Latin America as well?

To answer the second part of it, Telefonica. We see opportunities not just in Europe but, yes, in Latin America as well. In terms of how they all fit out and how they fit together, that's work in progress. I think the main element that we've been really happy with is the success of some early pilots that we have been doing in presentations with Telefonica that have really gone well.

There's a desire on their part and our part to expand the number of users, and obviously you know that of a company that size, it provides a great growth opportunity for us. In terms of focusing on Latin America, it's an area that we clearly have looked at. We are primarily focused in Europe -- in really scaling Europe out. But to the extent that those opportunities come across us, like a Telefonica, who has several properties there, we'll certainly will take advantage of that for sure, Scott.

Great. Good luck with that.

Thanks.

Thank you. The next question is from the line Shyam Patil from Raymond James & Associates. Please go ahead.

Hi, thank you. Good quarter, guys.

Hey.

On AT&T, it seemed like last quarter, the cloud deployment there was somewhat small and more in testing phase and now it looks like it's going to be or could be a fairly sizable opportunity over time. Can you talk about what you're doing for AT&T now versus a Verizon and what the opportunity could be over time?

I think, Shyam -- I think it's a good question. There's a lot of -- we have obviously a history with our activation services in and around AT&T for years. We believe that there's opportunities for us to pilot new ways in which you can kind of combine both ends of our business very effectively. When so when we look at that market along with each of our carriers are definitely approaching the market somewhat differently in terms of how they see the value. Or how they want to monetize the cloud. The big significant change from last call is exactly the same way you described it.

We had some good concepts that we're moving. We've moved through those phases successfully, and now, we're actually going to be getting on some of the devices. In terms of the longer-term play, obviously as those devices become more efficient and hopefully, we're more successful with that, that would give us an opportunity to go across channel with our solution and not be bound by each individual channel that we support today. It's very early on. But the progress that we had hoped to make since our last call has been a little bit better than I expected.

Great. I just have one follow-up. On the non-AT&T revenue, that seems like it's growing pretty nicely. Just wondering if you could talk about how the cable piece is doing within that non-AT&T revenue, and if there are any head winds that are on the growth rate there. If we look at the actual non-head wind growth, your thoughts on it. Thank you.

Yeah, definitely on the cable side of the business, clearly, as cable properties look for growth in different areas, the transaction volumes are not going to be as big as we see on the side of the equation as we see on the mobile wireless side. Also, obviously, with some of the work we've done with some of our cable providers in the wireless space with that initiative being shut down this past year, that obviously puts a little bit of head winds for us on a go-forward basis. But at the same time, it creates great opportunities for us as the cable providers, like for example, Comcast and others have done with Verizon, where we can find ways to partner through our existing base.

Great. Thank you.

Next question from Julio Quinteros from Goldman Sachs. Please go ahead, sir.

Good afternoon. This is actually Jeff Glaser stepping in for Julio. Just really quickly. I was curious to know if you might provide a little bit of color around the gross margin situation and how much longer you'd expect to see pressures persisting in relation to the ongoing Verizon ramp up?

Well, actually, when you -- you're talking about the operating margins, just to be clear, Jeff? Yes. So really what the challenge for us right now is, we have lowered the range of the revenue but we continue to spend at the levels that we were originally planning on spending. So the R&D spend is going to continue to ramp up but the revenues are expected to ramp up as well. We don't intend to stop spending from a development point of view, but we do intend to start driving the revenues. So we do expect, as a percentage, that to begin to rise. And we just finished a quarter with an operating margin of 27%, which is by far very strong for us. It's the best we've had for four years. So, it's a pretty strong model and it is showing the effects of that.

Yes. Okay. As a follow-up. Is there visibility on for 4Q on activations?

We don't break out the various types of transactions we do at this point.

Okay. Okay. Great. Thank you.

Thank you. The next question is from the line of Lauren Choi, and that's JPMorgan. Go ahead, please.

Hey, guys. Just a quick question on the guidance. Outside of the effects from Sandy, is there any changes to guidance that you're embedding in there, whether it's from volumes on iPhone or holiday season caution that we -- just wanted to understand that a little bit as we look into 2013 as well.

No. So we actually aren't providing any guidance into 2013. But I think, really the impact that we've had here in Q4 is all around Hurricane Sandy in terms of the professional services that Steve talked about as well as really looking at maybe the lower end of volume ranges that we've got from some of our customers as we look through them. And the wider range that we're providing as a result of it.

The next question is another one on professional services. So I think you mentioned the catch up ahead of Verizon. Are there any other catch ups that we should be aware of on additional things that you guys are doing that would, I guess, propel the professional service to go beyond the 20% to 25% perhaps in 2013?

You know, Lauren, I wouldn't say it's just simply Verizon, just to clarify that. There's a lot of companies that has got Northeast challenges from the Hurricane Sandy. From a business model, we expect and we continue to expect professional services to be roughly around anywhere from 20% to 25%. And that's how we've always looked at the model. Obviously, this year, it's been a bit higher as we ramp up some of these newer solutions. As we start to normalize, we're expecting it to be roughly around 25% of our revenues.

Okay. Good. Thank you.

Thanks.

Thank you. The next question is from the line of Greg Burns from Sidoti & Company. Please go ahead, sir.

Good afternoon. When we think about your cloud business, a lot of the focus now is on the mobile content management; but now that you're being embedded on these devices, could you just talk to maybe the longer term internal road map? Or how you're viewing this market? How it's going to develop now that your platform is on the device? What, longer term, the potential is for Synchronoss and the kind of transactions and activations you could be processing going forward or maybe a use case or two that we can think of?

Yeah. I think, well, ultimately the value that most of the carriers are seeing in the cloud services is that, more than just basic synchronization and backup and secure content. That's kind of the table stakes. And even taking it across operating platforms, you see a big driver that we're seeing in the business today is a lot of carriers are rolling out shared mobile data plans. And in those plans, they're finding out that not only are consumers adopting them at the rates they had expected, but there are multiple operating devices that sit within those mobile share plans. You may have three IOS devices and one Android device.

So as they become more relevant, the ability to control a personalized cloud view of that for carriers is pretty significant. In terms of where we see some use cases down the road, by having the data and knowing your carriers or what your subscribers want to do, it provides an opportunity to provide definite monetization ways that carriers can offer, certain opportunities both in services to their customers, the ability to have devices shipped that are preloaded and have a lot of the configurations that you would expect to have set up so you would convert over to the new device. And a lot of those use cases going forward have a tremendous amount of value.

Today, for example, we see a specific one is insurance. A lot of people buy insurance a lot. They don't just want to insure the device, they want to insure their content on that device. So having that backed up in part of an insurance offer is very compelling. And there's applications like that that you'll start to see get tweaked, marketed, and pushed in the market thatcreate good monetization opportunities for the providers.

Okay. And when we think about the road map at Verizon versus the beginnings of what you have at AT&T,it sounds like the AT&T road map is incorporating a lot of some of your legacy transactions or services that you have been providing for them. So it sounds like it could potentially be more robust or more transactions for you to handle. Is that the case or is just two different ways of attacking the market?

I think it's more of different ways to go after the market. Certainly there's different things that we could bring to market for each of our providers. This is true across all our customers, Vodafone and Telefonica. It really depends a lot on what I was saying earlier around how they choose to go market and monetize that. A lot of folks have realized pretty consistently that they have to be more end-to-end. They can't be these point solutions.

And two, that they've got to really make sure that they have the good marketing plan or application rolled out with those cloud services to consumers so they can prioritize those. And each of the providers likes to market themselves in a slightly different way. The cloud would be no different than that. And our core platform will be adjusted and rolled into those different scenarios. As Larry pointed out earlier, a lot of the leverage in that cloud platform and a lot of the re-use is very relevant across our base.

Okay. Thank you.

Thank you. Sir, we have no further questions in the queue at this time.

Okay. Well, thank you very much. I appreciate everybody joining us. And we look forward to talking to you soon.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Have a great afternoon. Thank you.