Synchronoss Technologies Inc (SNCR) 2019 Q3 法說會逐字稿

Greetings, and welcome to the Synchronoss Technologies, Inc. Third Quarter 2019 Earnings Conference Call. (Operator Instructions) As a reminder, this conference is being recorded.

It is now my pleasure to introduce our host, Joe Crivelli, Vice President of Investor Relations. Thank you, sir. You may begin.

Thanks, Diego. Good afternoon, everyone. Welcome to the Synchronoss Technologies' Third Quarter 2019 Earnings Call. Joining me on the call is Glenn Lurie, President and CEO of Synchronoss; and David Clark, our Chief Financial Officer.

During the call, we'll make references to our prospects and expectations for 2019 and beyond and other statements relating to our business that may be considered forward-looking statements within the meaning of the federal securities laws, including statements about our future trends, future financial results and financial position, business prospects and market opportunities. Generally, forward-looking statements are identified by words such as expects, believes, anticipates, intends and other indications of future expectations.

These forward-looking statements are based on the business environment as we currently see it and include certain risks and uncertainties. Please refer to our SEC filings for more information on specific risk factors that may cause actual results to differ. Any forward-looking statements on this call are based on assumptions as of today, and we undertake no obligation to update these statements as a result of new information or future events.

In addition to U.S. GAAP reporting, we report certain financial measures that do not conform to GAAP. We believe these non-GAAP measures enhance the understanding of our performance. Reconciliation of the GAAP measures to their non-GAAP measures in addition to a description of the non-GAAP measures can be found in today's earnings release.

I'll now turn the call over to Glenn Lurie.

Thanks, Joe, and thanks, everybody, for joining us today. Before I comment on earnings, I want to take a moment to comment on the multiple exciting and transformative new deal that Synchronoss has announced.

Today, we are very excited to announce a new major U.S.-based Tier 1 carrier customer for our white label cloud offering. While as it is typical in the industry, they have requested they remain quiet around their identity until they launch the service in early 2020.

Over time, we expect this customer to generate material revenue for Synchronoss. This is obviously a tremendous growth catalyst for Synchronoss that we believe puts us on the path to return to sustained double-digit revenue growth in 2020 and beyond.

In addition, we are very excited about the deal we announced with British American Tobacco for our Digital Experience Platform last week. I'll talk about this deal more in a moment, but we believe with the completion of these 2 new modules, an analytics-based decision engine and a catalog module, we now have the most advanced customer experience software available for retailers today. As British American Tobacco is also our first DXP customer outside our traditional TMT ecosystem, we believe the successful pilot will result in a proof case we can market to an entirely new set of prospects.

Combined with our other new business wins we announced this quarter and in the first half of 2019, we believe we are executing and moving the company forward to an exciting future with 4 platforms that can help customers accelerate revenue growth, manage expenses and transform their customer experience. With this as a backdrop, and as a result of Sequential Technology, or STI, currently being in the process of evaluating strategic alternatives and moving toward the end of that process, we made a decision to take a conservative financial approach to our STI relationship.

As our understanding of the potential cash we would realize from the STI process has become clear, we are writing off $26 million of STI-related accounts receivable, which represents invoices from 2018 and 2019. Our revenue relationship with STI is within the scope of new lease accounting rules, which requires us to account for the write-off as a cumulative adjustment to prior revenue, that is as an offset against third quarter 2019 revenue.

Excluding the STI write-down, third quarter revenue would have been $78.2 million and would have put us very much on track to meet our original full year guidance that we established back in March. So the third quarter GAAP revenue figure of $52.2 million does not accurately reflect the operational performance of our business.

Obviously, the onetime cumulative adjustment to revenue will have an impact on our full year guidance. David will discuss that in a moment.

I'll now update you on the recent new customers and partnership wins as well as the status of some of the deals we announced earlier this year. First, on our cloud business. I've already talked about the new U.S.-based Tier 1 cloud customer but wanted to also give an update on the rest of our cloud business.

Our Verizon Cloud offering has delivered healthy double-digit subscriber growth since the end of 2018. In addition, we have worked closely with the Verizon team to launch a new family plan that provides 2 terabytes of storage for $12.99 per month, which is seeing good early traction under this plan. We view the Verizon relationship as extremely strong and look forward to continued innovation around their cloud product.

The new cloud customer we announced in the second quarter has extended the launch from the third quarter to the fourth quarter. So we are still silent -- on the silent mode on the customer's identity until that time. We will provide more information to investors as soon as we can. We are excited to get this to market and are working closely with them to make that happen.

We also believe we will begin recognizing revenue from our previously announced Assurant relationship in the fourth quarter as Assurant is planning to begin migrating customers to the Synchronoss Cloud.

Second, with respect to our Messaging business. Let me give you an update on our work in Japan on Plus Message. Our carrier partners are now in the process of rolling out A2P, application-to-person messaging, and advertising to go with it. Initially, they are focused on select industries where carriers believe they can optimize success in the first wave of the A2P launch. We expect our initial revenues from A2P messaging to begin flowing in fourth quarter of 2019. We are very excited about the new source of recurring revenue that we expect to grow to scale in coming years. We also have some additional exciting opportunities we are working on in our advanced messaging business that we hope to announce in the very near future.

Third, our digital, or DXP, business. Our momentum in our DXP business has accelerated considerably after the announcement of our agreement with Amazon, Wireless Advocates and Telkom Indonesia last quarter. This quarter, we also announced DXP deals with British American Tobacco and Indosat Ooredoo.

Regarding BAT, or British American Tobacco, last week, we announced they are launching a multicountry pilot of DXP across 25 of their 2,000 BAT retail locations in Europe. We believe the success of this pilot could lead to additional permanent deployment across the additional BAT locations and channels.

The Synchronoss DXP platform will provide BAT with the ability to quickly design, deploy, manage and optimize customer journeys while providing a unified experience across its owned retail locations.

As I stated earlier, our new catalog and decision engine modules, combined with our core DXP platform, will help BAT to better manage retail employees in delivering a satisfying retail experience that improves the overall customer experience and maximizes revenue.

As I also stated, this pilot with BAT is significant because it's the first proof case outside -- for DXP outside of the TMT market base or ecosystem. We believe this will be able to leverage our success at BAT with other traditional retailers. We are also announcing today that Indosat Ooredoo, a leading telecom service provider in Indonesia, has chosen the Synchronoss DXP platform to deliver a unified interconnected user experience for customers across its engagement channels.

The Synchronoss DXP platform will also support Indosat Ooredoo's future digital economy project, a nationwide initiative to encourage collaboration and develop new ideas, products and use cases involving IoT technology to help economic growth.

Rackspace has signed a multiyear deal for our financial analytics platform to accurately validate expenses and invoices. This is a long-standing business for Synchronoss and a product within our digital portfolio and platform that we believe has nice growth potential heading into 2020. The first live deployments with Amazon are underway with carriers in Singapore and Mexico in process of being integrated with Amazon. Three other customers are in the queue for integration in the fourth quarter, and Amazon has indicated they plan on assigning 5 more customers per quarter for Synchronoss going forward.

As mentioned, the Amazon partnership is a shared success model where we share in any revenue generated through these carrier deployments. As such, this is one of the larger contracts we announced in 2019 in terms of total expected contract value.

Wireless Advocates has officially signed off on acceptance criteria of DXP, and they are now moving into full implementation. Our first revenue from this 3-year deal will be realized in the fourth quarter. We are currently building out customer journeys and workflows and will move to integrating the carrier activation flow and -- into DXP once that work is completed.

Our Telkom Indonesia DXP deployment is likewise underway, and they are all utilizing DXP to consolidate multiple data sources for one of their commercial businesses to feed into a single pane of glass management portal.

And fourth, Internet of Things, or IoT. It has been extremely active year in building our IoT revenue pipeline. As we announced, the partnerships or deals with Arrow, Microsoft, Rackspace and Tridium last quarter. Adding to these today, we are announcing a partnership with Accruent, the world's leading provider of physical resource management solutions with 10,000 clients worldwide to combine Synchronoss' expertise in smart building analytics with a current asset monitoring system. The collaboration will deliver valuable insights and efficiencies to enterprises across facilities and greater expand the effectiveness of our IoT solutions.

In conjunction with the Accruent partnership, we have signed a letter of intent with CityFM, one of the world's most trusted facility management companies with over 12,000 employees across Europe, Australia, North America and Asia to combine their expertise in facility management engineering with Synchronoss' expertise in software analytics to create an end-to-end facility management offering which is scalable and will drive greater efficiencies.

We also have completed our live proof-of-concept with Rackspace undertaken in partnership with Microsoft IoT Accelerator. As a result of that POC, Rackspace has signed a multiyear deal to license our Smart Buildings solutions to monitor, control and optimize power usage in their headquarters facility and major data centers in San Antonio, which represent over 1 million square feet.

The AT&T IoT sales channel is also gaining momentum. AT&T has lined up the next 10 clients that we are jointly working on. We began engaging with these clients in early Q4. By any measure, this is a lot of traction for Synchronoss. I am very proud of the work the entire Synchronoss team has done over the past 2 years. In that time, we've rebuilt our team, white labeled our platforms and products, added powerful new platforms such as DXP and IoT to our offerings and energized the sales effort and sales funnel. This year, we are seeing the fruits of that labor with numerous deals that we have announced.

We believe these new customer relationships will drive revenue and EBITDA and shareholder value for years to come.

Most importantly, these new relations set Synchronoss up very well to become a consistent double-digit growth company with a higher percentage of reoccurring revenue because the majority of these deals are SaaS, PaaS, Software as a Service, Platform as a Service, based revenue models.

This has been my goal since becoming CEO of the company, and our hope is that we will be achieving this in 2020. The focus in 2018 was preserving existing customer relationships. The focus in 2019 has been growing the sales funnel for all 4 platforms while winning new business and growing our quality revenue. With the deals announced in 2019 such as Amazon, British American Tobacco, our 3 new cloud customers as well as our strong relationships with Verizon, BT and the Japanese carriers and others, we believe we now have the business in hand we need to meet our long-term revenue and EBITDA growth goals. And we are not done yet. There's still additional transformative new deals being worked, and the sales funnel continues to grow week by week.

David now will review the financials in more detail.

Thanks, Glenn, and thanks, everyone, for joining us. I'll review our third quarter results and update guidance for 2019.

Revenue for the quarter would have been $78.2 million. However, due to the impact of the STI impairment, GAAP revenue is $52.2 million. This compares to $83.3 million in the year-ago quarter and $77.8 million in the second quarter of 2019.

Investors should note that the STI revenue write-down included invoices from 2019 as well as prior periods. Using the pre-STI $78.2 million revenue figure, recurring revenue was 79% of total in the third quarter compared to 80% in the second quarter. Cloud revenue was $40.5 million, down 5.8% compared to $43 million in last year's third quarter. Cloud revenue was essentially flat from $40.4 million in the second quarter. The year-over-year decline was due to a large true-up of cloud revenue in last year's third quarter as actual subscribers exceeded forecast subscribers in the Verizon revenue model.

Digital revenue, which is where the STI impact sits in our P&L, was $20.7 million in the third quarter excluding the STI revenue write-down. This compares to $28.9 million in the year ago quarter and $22.2 million in the second quarter. The year-over-year decrease was due to the sunsetting of a legacy product in 2019 as well as the recognition of deferred revenue in the third quarter of 2018 from the prior owner of the honeybee platform.

Messaging revenue was $17.1 million, up 50% from $11.4 million in the year ago quarter and up 12.5% from $15.2 million in the second quarter this year. The increase was due to additional license sales in the Japanese market.

I'll now discuss profitability metrics. Note that GAAP gross margin, operating margin and net loss were all impacted by the STI revenue write-down, but we have added back the STI write-down in the adjusted figures to provide the ability to do an apples-to-apples comparison to prior quarters.

Adjusted gross profit in the third quarter was $43.6 million. For the 9-month period, adjusted gross profit was $138.5 million. Non-GAAP loss from continuing operations was $6.9 million in the quarter compared to a $10.7 million loss in the year ago quarter and an $18.8 million loss in the first 9 months of 2019 compared to $46.6 million loss in a comparable 2018 period.

GAAP net loss for the quarter was $69.4 million or $1.70 per share and $122 million loss or $3.01 per share for the 9-month period. Non-GAAP net loss from continuing operations attributable to Synchronoss, which excludes the STI write-down, was $25.4 million or $0.62 per share, an improvement from $33.5 million or a loss of $0.84 per share in the third quarter of 2018.

For the 9-month period, non-GAAP net loss from continuing operations attributable to Synchronoss, which excludes the STI write-down, was $51.3 million or $1.26 per share, an improvement from a $75 million loss or $1.86 per share last year. Adjusted EBITDA in the quarter was $5.8 million compared with $9.4 million in the third quarter of 2018 and $8.7 million in the second quarter of 2019.

Now turning to the balance sheet and cash flow. Cash and marketable securities totaled $20.1 million, which is in line with our net cash balance in previous quarters. We also paid down the remaining balance on our convertible notes in August. Over the past 5 quarter ends, our cash balance net of the convertible debt outstanding has ranged from a low of $13 million to a high of about $32 million.

Accounts receivable was $73.5 million at quarter end, and the reduction from $100 million at the end of the second quarter was largely due to the STI write-down. Net cash provided by operating activity for the 9 months ended September was $11.8 million compared to a negative $60.7 million last year. This is a significant turnaround in the last 12 months.

As we announced, Synchronoss has entered into a relationship with Citizens Bank, which provided a $10 million 3-year revolving credit facility to the company. In addition to the Citizens revolver, we also entered into a supply chain finance program with Citibank, which is expected to provide, on average, $15 million to $20 million of additional liquidity for the company going forward. We continue to explore longer-term financing solutions as we get closer to the August 2020 date when we have the option to redeem our preferred stock without penalty. We are encouraged by the conversations we've been having so far with both capital providers and investment bankers about what form that recapitalization may take.

Now to turn to guidance. We are revising down our annual guidance due to the impact of the STI revenue write-down and the transition to cash-based accounting for the STI relationship. We are also narrowing the guidance range.

As Glenn mentioned, our businesses are performing as expected, and we are tracking -- we were tracking to meet the original guidance that was issued at the start of the year before the decision was made to address our STI relationship. I'll also note that all the deals we announced this year were in our funnel and included in our guidance at the start of the year, which is why we have not increased guidance despite the visible progress on the sales front.

We now expect revenue for the full year to be $308 million to $315 million and adjusted EBITDA to be $24 million to $30 million. This revised range accounts for the removal of $26 million of STI revenue from the first 9 months of the year as our accounts receivable write-down was accounted for under lease accounting as a cumulative revenue reduction. It also accounts for the lower expected fourth quarter STI revenue as we were recognizing revenue going forward on a cash basis.

To make the math easy, if you take the low end of our prior guidance range, $340 million, and deduct $26 million write-down as well as the 2019 fourth quarter revenue that's expected to be $6 million lower due to transition to cash accounting, it will bring it to $308 million, which is the new low end of the guidance range.

Earlier this year, we mentioned we'd be making a $20 million to $25 million success-based investment in growth of the business to support new contract wins. Through September 30, we've spent approximately $10 million of this investment and expect the balance to be spent in the fourth quarter based on new business we expect to close in the fourth quarter.

In closing, we know the STI relationship has been a difficult chapter in the company's history. We believe we're making the right decision to take a conservative financial position on our STI relationship as we can now all focus collectively on the future of Synchronoss. We believe that the future of Synchronoss in closing deals, such as the new cloud customers we have announced in 2019 and deals with BT, Amazon and our other customers as well as the traction we are demonstrating in our DXP and IoT platforms.

As Glenn said, these are all transformative deals that positions us as a growing provider of SaaS and PaaS-based solutions going forward.

And with that, we can open the line for questions.

(Operator Instructions) Our first question comes from Mike Walkley with Canaccord Genuity.

This is Anthony on for Mike, actually. You recently announced the deal with British American Tobacco. I know you mentioned, Glenn, this is kind of a foray outside of TMT. Can you just talk a little bit about how this deal came about, just given the focus on TMT previously up to this point? And is there kind of a set strategy of how you're going about this diversification, like which verticals you might be tackling first?

Yes. Thank you for the question. Yes, there is a strategy around it. Look, one of the moves we made when I came in was to try very quickly to move into TMT. Obviously, Synchronoss' history is very carrier focused, and we've been able to do that with some of the Microsoft deals, Amazon deals and other things we've done. One of the great things about the digital platform, DXP, is that it is very flexible and works in many, many places. I mean we -- because of our focus in TMT, that's where we have our relationships.

We have started to build relationships with others outside of that, whether third parties that deal in digital experience as well as potential even other consultants that have seen and worked with us on our platform. And we were introduced to BAT and went in and obviously showed them what we could do for them, looking at them trying to improve their overall customer journeys, focused obviously, as we announced, on their 25 actual physical locations. But we're pretty excited about the opportunity to do in a similar way how we're working with Wireless Advocates, really have the entire platform, allow them to completely rethink what a customer touch is and what customer journeys can be. You will see us heading in this direction as we go forward.

There -- we have a whole bunch of discussions happening outside of what is traditional TMT because the software is just so very much relatable to anybody who has multiple channels or customer journeys inside of their business, which we know is a massive marketplace. So this was the kind of the next step. And Mary and her team have done a great job along working with Jeff and the team, and we just got back from Mobile World Congress in L.A., where we had numerous conversations with just retailers outside of just the traditional TMT ecosystem.

Got it. And then just kind of in conjunction with that, do you foresee any impacts to SG&A in terms of kind of expanding the scope of the sales force to -- outside of TMT?

Yes. Not at all. We actually don't because one of the things that we're going to be doing is we're going to be utilizing more partners and more third parties that will go out and sell with us. One of the key partners that we announced quite a bit ago was Rackspace, and Rackspace is working very closely with us in helping us show DXP to their customers. For example, many of their customers are traditional retailers outside of the ecosystem. So we're going to utilize partners, third parties that want to sell and actually represent our DXP platform as well as co-sell with us to do that.

Got it. And then on the STI, I think, just kind of back of the envelope math, the margin profile of that, is it around 25%? Or I don't know if you can provide color on that.

Yes. It's hard to do because there are so many shared services that support our non-STI businesses. So it's hard to sort of break out what is directly applied or not directly applied. Obviously, this impairment was added back for EBITDA purposes because it's a nonrecurring item.

Got it. And then just lastly for me, and I'll pass on the queue. I think the U.S. carriers recently announced RCS-CCMI JV recently. I don't know how much you can speak to Synchronoss' potential involvement in that.

Yes. We can't comment on that at this time.

Your next question comes from Richard Baldry with ROTH Capital.

The $25 million sort of success-based spending you expected for the year has been pretty moderate to roll out throughout the year, but it looks like it would speed up arguably pretty materially in the fourth quarter, I would say. But can you talk about what would be the drivers of that in the fourth quarter, where we would see that through the P&L, and what we would expect to see in headlines maybe coincident with that factor?

Yes. Sure. I can start, and I'll see if David wants to jump in. We -- as we stated, much of that is success-based, and you've seen the number of deals that we've gotten done. And obviously, there's deals we now have to go deliver to our customers in fourth quarter, obviously. For example, the Tier 1 U.S.-based new cloud customer, we're -- we've already started that work so that they can get launched in early 2020. We also expect to close additional deals in fourth quarter that we would have to invest in, in fourth quarter. I can't say much more about that, as you probably understand, but we're very optimistic that we have other deals to close and which will then drive that spend.

And, Rich, that would manifest itself in 2 lines, one being cost of revenues and one being research and development.

Okay. And when you talk about your goal to get back to double-digit growth and possibly as early as 2020, would that be based on sort of a pro forma revenue backing that $26 million into it? Or that -- with that taken out of the number for comparison's sake?

I think for comparison's sake, you have to take it out. I mean we do expect to have an ongoing relationship with STI or whatever successor there is, but we don't really know what form it's going to take. So I think you have to take it out.

Okay. And then there's a lot of new wins come, but I think they all share a characteristic of you've got to deploy the customer before the revenue is generated out of it. So can you maybe talk about the variety of sort of ways to look at how quickly you think some of those come online, how quickly they could ramp, and whether you think they could be material in first half 2020, second half 2020? Just any sort of color around where we start to see the impact of those after the headlines start coming.

Yes. It's a really good question. I would say it this way. Let me do it from a high level by platform for a second, and then -- because I really can't -- it's very hard for me to get into specifics of specific deals and specific contracts. But if you think about a cloud customer, the majority of our cloud deals are success-based. Yes, there are some implementation dollars, but that is not the material. The materiality happens as you grow the subscriber base, and we obviously get paid on a per subscriber basis, which by the way is fantastic for us long term.

But as you know, you've got to invest short term, and then it slowly builds. I do think when you look at the 3 new cloud deals, that we've announced, obviously, Assurant and the work we're doing with them and then the one we announced in the second quarter that I mentioned in the call today that we look to launch in fourth quarter and then obviously the new one, those will have revenue for us in 2020. They will grow in 2020. They will start from scratch and then grow. And so that is part of being in the business and being what we want to be obviously, which is a SaaS, PaaS company. And we want to win with our customers. We want to grow with our customers.

If you think about DXP, the majority of that is there -- again, there's implementation costs upfront. And then in most cases, we are going to be working in a success-based model there as well with our customers. The deals we've announced are exciting, and we've gotten a lot done, and we're starting to see really nice wins on DXP. We do expect that, as I said, that we will start to see revenue from those as well. Obviously, the Amazon relationship is a success-based relationship with us sharing revenue. We've got our first few under our belt here, and then we expect more, as I talked about, and we expect more in early 2020.

Whether you talk about Wireless Advocates or Indosat and these others, they're all exactly what we said they were going to be. They're exciting deals that we're going to obviously grow into, and we will see revenue from those in 2020. If you think about IoT, a little different. If somebody -- when we do a Smart Buildings, we're -- like we've done with Rackspace is a great example. We are seeing revenues from those a little quicker. And then obviously, the key to our Messaging business right now is our Plus Message relationship, and you've seen what's happening there. We certainly hope to have additional new deals in advanced messaging as well as in our e-mail business. And those obviously have a bit of a different revenue profile, in that depending on how they come, they can come earlier.

So I hope that helps. I really can't get into very specific deals.

Right. And again, sort of broadly speaking, you had a pretty big flurry of activity on the deal front recently. How do you feel sort of generically about the rest of the year heading into 2020 in terms of more deal potential? And maybe also just about your bandwidth to support sort of the wins you've had and getting them ready to launch and with more to come.

Yes. We feel really good. We spend a lot of time on this. Mary and Pat and Jeff really drive this -- sorry, Mary Clark, our CMO; Pat Doran, our CTO; and Jeff Miller, our CCO, spend a lot of time together, working through where we're going to put our resources and how we're going to work on delivery. The good news is Pat and his team did a fantastic job white labeling these platforms, obviously, the cloud in '18 and working through '18 and '19 with the others. So our ability to repeat is -- and our velocity is definitely picking up, and our ability to deliver velocity at a lower cost is also happening. So those are all part of our planning process as we came into 2019. So we feel very good about that.

Now as far as the funnel goes, the sales cycles in TMT are long. And I had a part of my earlier comments where 2018 was about making sure our current customers were good and starting to build the funnel. 2019, we're reaping the benefits of that hard work, and that's why you're seeing the deal flow come as it is and come in the volumes it's coming. We also -- if you recall, one of the very first things that I did with the team coming in is we wanted to be a truly global player. You're seeing many of these deals happening in Asia and in Europe as well, and that goes -- kudos to our leadership in both of those regions, and Jeff and the team working together to get those done.

So we actually don't see the deal flow slowing. We do see our ability and the velocity to deliver the deals going up and the cost structures to deliver them staying flat or coming down based upon the fact that we're a -- our goal is to be a SaaS PaaS white label player. That's a lot of repeatable. I've said many times, I want 80% white label, 20% custom. That's our goal. I'm not saying we're there yet. We're working towards that, but we're definitely making good progress, which allows us to handle this volume.

Our next question comes from Sterling Auty with JPMorgan.

This is Sahil on for Sterling. So did the delay in the cloud service to the new U.S. customer to Q4 or maybe after that lead to any impact on revenue in this quarter or maybe the guidance?

No, it does not lead to an impact in this quarter. As we said that we would -- that particular customer, we expect to be launching in early 2020. So we expect that it will lead to our guidance for 2020 when we give that.

And so any plans to replicate the success of the Messaging business in Japan to other geographies? Any immediate plans?

Absolutely. We definitely have that plan. Obviously, we're proud of the team and what we've done with the Plus Message and the carriers in Japan. We think it's a great model, and we absolutely are having conversations with others globally about that model and really hope that we will repeat that success many, many times over.

Got it. And one more, if I may. From a modeling perspective, which part of the -- I mean which segment of the business do you see growing as the fastest, if you return to double-digit growth in 2020?

Well, look, I think as we went through, we obviously believe our cloud business is very strong, obviously adding 3 new partners, customers this year. We also obviously are gaining incredible momentum in our Digital Experience Platform. And as we've discussed from your first question, the Messaging business is a solid business, a strong business for us, and we do anticipate replicating what we're doing in Japan and other countries. And then lastly but certainly not least, the IoT business was nascent this year. It was a very, very small acqui-hire that we've done a lot of work on. And the level of partners that we have announced just shows you that we have something very, very special in the marketplace, and we fully expect that to be a grower in 2020 as well.

(Operator Instructions) Our next question comes from [Jason Allan] with [Parkwell Investments].

Two brief questions, and just to clarify, I guess, what prompts them. I've been following the company and investing in it now for about 1.5 years and have enjoyed tracking the progress. At times, I feel discontinuity between the numbers and the narrative that's communicated around the numbers in conversations like today. And so I guess trying to get a little more clarity there, I'm going to ask 2 questions that, for my own sake, hopefully bring some clarity. Number one is when you talk about double-digit sequential growth, which we've spoken of a number of times here, as you look to 2020 and you talk about that double-digit sequential growth, Glenn, at times, to me, that sounds like an expectation. At times, that sounds like a business goal. Can you kind of clarify and elaborate a touch as which category you're communicating in on that front?

Yes. So we -- first of all, thanks for the question, and we never use the term or word sequential. Let's make sure we're clear on that, okay? What we said is, David said and I said is that we believe we can return to double-digit growth going forward, and we will make and give our guidance for 2020 when time is appropriate as we head into the new year. So that's kind of point A. Point B, we believe based upon the customers that we've put on this year, we believe based upon the deals we've announced, we believe based upon the deals that we hope to get across the line and will announce before the end of the year, that, that will be possible for Synchronoss going forward, which is having double-digit revenue growth from an -- on an annual basis.

Okay. And the second question kind of is derived from that. Help me to understand better internally for you and your team the maturity of a deal when you're able to bake that into your guidance. Because there have been times when I'll hear deals analysis saying, okay, the quarterly call, perhaps, that will be an upward revision of guidance. And then comments will be made, including on this call earlier that, well, that was already baked into guidance. So I know you guys are intentional about that internally as to the relative maturity of a deal for you to factor that into your guidance formally. Can you elaborate on what that looks like for you and your team?

So I mean the good news, bad news of our business is we have very long sales cycles. The bad news is it takes -- longer than we like. Good news is when we go into a new year, we do have visibility as to what the funnel is. So we really think long and hard about when we do issue the annual guidance. It's one of the reasons we also do issue strictly annual guidance because things can change quarter-to-quarter and also put a fairly large range in there. So hopefully that gives you a little more clarity as to how we think about it.

One thing I'll add to David's comments, I think is important, too. When you -- in a business like ours, with our 4 platforms, looking at our sales funnels, we also know not every deal is going to close. So we have a history of understanding what percentage do. So this is an art and a science when you walk through -- look at the deals you have, look at what you're working, look at what percentage in the past years have closed in that -- of those deals, and then as David said, you put in your guidance. When we give our guidance, you always have a bit of a low and a high because you're going to have movement based upon what happens during the year. And that's exactly what's happened with us since I've been here for going on 2 years.

Ladies and gentlemen, there are no further questions at this time. I will turn the floor back to management for closing remarks. Thank you.

Thank you very much. By the way, thank you, everybody, for joining us today, and I appreciate all the questions. They were very good. We again are very proud of what we've gotten accomplished. Obviously, the comments that David and I made today about STI, that was a very, very needed conservative accounting that we felt was the right thing to do for the business and the right decision to make. I am also very proud of the fact that the trend that we had would have met guidance, as we said numerous times, that we gave at the beginning of the year for 2019. The momentum we have in all 4 platforms is exciting, but we have a lot of work to do, and we know that as a management team. But we appreciate everybody's interest and everybody's support, and we'll talk to you all soon.

This concludes today's conference. All parties may disconnect. Have a great day.