Synchronoss Technologies Inc (SNCR) 2019 Q4 法說會逐字稿

Greetings, and welcome to the Synchronoss Technologies, Inc. Fourth Quarter 2019 Earnings Conference Call. (Operator Instructions) Please note, this conference is being recorded.

I will now turn the conference over to your host, Joe Crivelli. You may begin.

Thank you. Good afternoon, everyone. Welcome to the Synchronoss Technologies' Fourth Quarter 2019 Earnings Call. Glenn Lurie, President and CEO; and David Clark, CFO, are joining me on the call.

During the call, we will make statements about our expectations for 2020 and beyond. These may be considered forward-looking statements within the meaning of federal securities laws, including statements about financial trends, future results of operations 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 the 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 descriptions of the non-GAAP measures can be found on today's earnings press release.

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

Thanks, Joe, and good afternoon, everyone.

Today, after market, we announced earnings for the fourth quarter, which represent a solid finish to 2019.

Revenue was $90.6 million, which is the highest quarterly revenue total since the fourth quarter of 2017. And adjusted EBITDA was $6.5 million, our sixth consecutive quarter of positive adjusted EBITDA. For the full year, revenue was $308.7 million, EBITDA was $27.6 million, which is in line with the revised guidance we issued on last quarter's call.

It is unfortunate that STI issues obscure what a strong financial results the company had in 2019, as without these issues, we would have hit both our original revenue and EBITDA guide for the year.

I want to leave investors today with 3 very clear messages. First, with the major new business wins we booked in 2019 and the quality of our new business funnel, we believe we have the business in hand to meet our financial objectives in the coming years. The results in the fourth quarter, which is our first full quarter without a major contribution from STI should provide investors with objective evidence of our momentum.

We continue to be optimistic about the additional new deals in our pipeline and in all 4 of our platforms and believe we have even more new contracts ahead of us in 2020.

Double-digit revenue growth is a reasonable expectation in 2020, and we will discuss when we talk about full year guidance in a moment. But I want to make it clear, if we simply execute on the numerous new business wins we booked in 2019, along with the quality of our pipeline, we believe we can fuel profitable revenue growth in 2020.

Second, we have $39 million of cash in the fourth quarter end, up from $20 million in the third quarter. David will discuss the drivers of cash balances in a moment. We continue to focus on optimizing our liquidity levels, improving free cash flow, reducing our investment in working capital and monetizing our assets.

And third, we have taken and continue to take positive actions to optimize our cost structure. For the past 2 years, we have reduced operational expenses, while simultaneously investing in our product platforms to grow the business. This is evidenced by improvements in our adjusted gross margin, the progress we made in narrowing GAAP and operating loss and the consistent positive adjusted EBITDA we have delivered over the past 6 quarters. And we are not done as we continue to look for additional opportunities to continue to optimize our cost structure. David will provide more details in a moment.

Let me highlight some of the company's 2019 business wins. Our announcement this morning of our cloud deal with AT&T, which is the U.S.-based Tier 1 cloud deal we discussed in the third quarter call, means that we now have the 2 largest carriers in United States, enabling our cloud platform. Combined, AT&T and Verizon represent over 270 million subscribers.

We also launched TracFone Cloud this quarter, adding another 21 million subscribers to our total addressable market, and launched our cloud service on Assurant's Pocket Geek application in February.

These customers represent an additional addressable market of approximately 20 million subscribers across multiple continents. While AT&T, TracFone and Assurant's are all early in their deployments, we are confident we will see incremental revenue in 2020, and these customers will grow into meaningful revenue stream for Synchronoss from -- for years to come. For example, assuming a very modest 5% penetration over the 3 years, these customers have the potential to grow into a pure SaaS revenue stream for Synchronoss that nearly equals our current cloud business.

We continue to execute well and build on our subscriber base within our existing cloud customers: Verizon, British Telecom, Proximus, SFR and Frontier. Organic subscriber growth at Verizon was in the low teens in 2019, demonstrating that our cloud continues to drive strong value proposition for mobile phone users.

In addition, in 2019 and in early 2020, we have renewed contracts with 3 of our legacy cloud customers: BT, British Telecom, for an additional 5 years; Proximus, an additional 3 years; and SFR, an additional 2 years.

We are working with all of our existing customers to bring best practices for growing their base of cloud subscribers. They realize that simply by refreshing and renewing their efforts to market-the-cloud platform will help them drive incremental revenue and incremental EBITDA. This is low-hanging fruit for both our customers and Synchronoss, and we are seeing good uptake here.

Our sales momentum in cloud is a strong validation of the interest being fueled by 3 key drivers: first, carriers must look for new sources of incremental revenue, and we've shown the industry that our cloud platform is a plug-and-play solution that achieves that goal; second, as the industry moves towards widespread adoption of low latency 5G technology, we believe that onboard device-based storage will decrease in importance and the most valuable and personal customer content will be stored in the cloud; and third, mobile operators now know their customer data is perhaps one of their most valuable asset. And that they cannot and should not relinquish control over that data to a competitor that will monetize it. We are squarely at the epicenter of these 3 powerful trends.

Another trend impacting our customers in the wireless ecosystem is the advancement in customer messaging, specifically, RCS-based advanced messaging. Carriers globally have seen competition from over-the-top messaging apps with a clear goal to disintermediate the carriers from their customers and take all the monetization opportunities available in the messaging space.

In Japan and now in the United States, Synchronoss has shown the carriers how to compete and enable the technology that will help them defeat this threat. Many of you saw the presentation that the Japanese carriers gave at BizLab, Tokyo in late 2019, outlining their plans to grow the Plus Message RCS application from 13 million to 40 million subscribers by the end of 2021.

They also highlighted use cases in which they are seeing 85% open rates for RCS, B2C, business-to-consumer messages, exceeding the 40% open rates they've experienced in traditional B2C e-mail and SMS messaging campaigns.

We believe this data coming out of Japan deployment indicates that our RCS messaging solution will evolve into a powerful digital and e-commerce platform for our customers. Our success in Japan was a key factor in helping us win the RCS advanced messaging contract with the Cross-Carrier Messaging Initiative, or CCMI, joint venture of AT&T, Sprint, T-Mobile and Verizon in November of 2019.

Our work with CCMI will drive meaningful licensing revenue in 2020 and beyond. And in fact, already made a meaningful contribution to the fourth quarter of 2019 revenue. And we are seeing upside in the total minimum contract value from additional programming work that was recently outsourced to Synchronoss by the joint venture.

Also note, there are approximately 230 million smartphones in United States compared to approximately 70 million in Japan. So the U.S. market is roughly 3x the size of the Japanese market. As a result, we believe that CCMI RCS messaging deployment in 2020 will be extremely attractive to brands that want to reach customers with a more engaging, interactive and effective marketing tactics that they can deploy.

Our first-mover advantage in launching advanced messaging in Japan and now bringing to United States gives us global credibility when competing for advanced messaging deals in other parts of the world. It is clear to global operators that there is an RCS messaging solution available that already been deployed and is operating at scale. We believe this gives Synchronoss a unique competitive position that no other company in the ecosystem can claim.

We made solid progress in continuing to build out our Digital Experience Platform or DXP in 2019. As investors know, the basis of our DXP was our 2018 acquisition of honeybee, which gave us a cloud-based purpose-built unique low-code, no-code platform to build and manage omni-channel customer journeys and workflows.

In 2020, we combined our Journey Creator with an advanced catalog and decision engine modules, and now believe DXP is the most comprehensive tool for a low-code, no-code customer journey creation and management.

We believe we're in the right space at the right time with DXP. A recent Inc. Magazine article called low-code, no-code software platforms, the industry disruptor you should pay attention to, and cited Gartner and Forrester Research that indicates these platforms will top $21 billion in spending by 2022 and account for 65% of all app development by 2024.

We signed several new customers for DXP in 2019, including, Wireless Advocates, a major third-party provider and retailer of wireless products and services with over 600 retail locations as well as our selection by Amazon as an integrator for digital products for operators around the world, the first of which we'll be launching this quarter, and British American Tobacco, or BAT, where DXP is being used to create and manage customer buying experiences initially in the U.K., Poland and Germany. We are seeing good progress in the proof of concept and BAT was so excited about what we are doing for them that they recently previewed the solution at their Board of Directors meeting.

Within our IoT business, we completed a number of important objectives set the stage for 2020 and going forward. First, we forged partnerships with some of the most important players in the IoT smart building space, Arrow, Tridium and Accruent.

Arrow is now our global partner to provide equipment-monitoring tools and installation services. The Tridium and Accruent partnerships integrate the Synchronoss smart building platform with 2 most widely used building management systems, enabling us to add consumption analytics and system monitoring to their solutions, while enabling 2-way communications so building owners can alter settings on the go.

In 2019, we also installed smart buildings platform at Rackspace headquarters and its data centers in San Antonio, in which we help Rackspace save approximately 19% on their monthly utility costs.

As a result, we are expanding the relationship to include 5 additional facilities in the U.S. and Europe. It's a proof case like these that make us confident that there is a ready market for our solution and validate the potential for this business to grow into a meaningful revenue contributor in the coming years.

As I said earlier, given the sales success in 2019, the new business wins and new customer relationships that we are ramping this year, we believe we have the business in hand to accelerate profitable revenue growth in 2020. David will discuss guidance shortly.

So in conclusion, we are entering 2020 with the business, the cost structure, the customers and obviously, the people to grow profitably. We are optimistic about the year and feel good about our competitive positioning. Our white label cloud is helping carriers to drive additional revenue and profitability, while our messaging platform is helping them defeat the threat of OTT messaging applications. Our DXP and IoT solutions are gaining momentum and bringing the Synchronoss name to entirely new industries and increasing our addressable market outside of our traditional TMT space. The entire team is singularly focused on 2020 being the year that we accelerate momentum, continue to strengthen our balance sheet and continue to build for the future.

Lastly, the impact of the coronavirus is something all companies are contending with right now, and we are no exception. At this juncture, it's difficult to predict what the impacts will be but here's what we know. Mobile World Congress Barcelona, the biggest trade show in our industry, was canceled in February. And that's traditionally an important show where we have numerous productive conversations with our current and new potential customers.

In Asia Pacific, where we generated 16% of our revenue in 2019 and, in particular, in Japan, many of our customers are restricting travel and limiting visitors to their offices. We, at Synchronoss, have formulated an action plan to work through these issues and to do business in a different and new way that will allow us to continue to successfully move forward under these circumstances. We believe that the guidance range David will discuss in a moment, takes these factors into consideration and into account with what we know today. We will monitor this daily, and if the impact worsens, we believe that there may be additional cost actions that we'll have to take in the future.

With that, David will discuss the financials. David?

Thanks, Glenn, and thanks, everyone, for joining us. I will review our fourth quarter and full year 2019 results and provide guidance for 2020.

Revenue for the quarter was $90.6 million, up 10.3% compared to $82.1 million in the year ago quarter. For the full year, revenue was $308.7 million compared to $325.8 million in 2018. Excluding the third quarter STI write-down, full year revenue would have been $334.7 million, up 2.7% year-over-year.

Recurring revenue was 62% of total revenue in the fourth quarter compared to 69% in the third quarter. For the full year, recurring revenue was 71%, down from 79% in 2018. Recurring revenue was a lower percentage of total revenue in 2019 primarily due to the licensing revenue we realized from CCMI and the Japan Messaging initiatives.

Cloud revenue was $41.1 million, down 3.4% compared to $42.6 million in last year's fourth quarter, and up sequentially from $40.5 million in the third quarter. For the full year, cloud revenue was $162.7 million, essentially flat from $162.6 million in 2018.

As we've noted in the past, the accounting treatment of our cloud business smooths revenue over the life of the contract, which is why revenue was flat despite the fact we grew subscribers in the low teens.

Digital revenue was $14 million in the fourth quarter. This compares to $25.3 million in the quarter a year ago. For the full year, digital revenue was $53.8 million, down 45.9% from $99.4 million in 2018 primarily due to lower revenue from STI.

Messaging revenue was $35.4 million, up almost 150% from $14.2 million in the year-ago quarter, and up just over 100% from $17.1 million in the third quarter. For the full year, messaging revenue was $92.3 million, up 44.4% from $63.9 million in 2018. The increase was primarily driven by revenue from CCMI and the Japan Messaging initiatives.

I'll now discuss profitability metrics. Total cost and expenses were $108.8 million in the fourth quarter compared to $124.4 million in the fourth quarter of 2018, a decrease of 12.6%. For the year, total cost and expenses were $416.5 million, a decrease of 15% compared to $490.1 million in 2018. The reduction in total costs and expenses reflects continued cost cutting, operational efficiencies, lower costs associated with data storage as we continue to migrate to the public cloud and lower restructuring charges in the year.

Within the 2019 expense base is the $25 million of investment we made in future growth during the year as signaled on last year's fourth quarter call. We do not intend to make a similar level of incremental investment in 2020. In fact, we are planning to reduce total cost and expenses again in 2020 to drive EBITDA and continue to optimize our cost structures by approximately $15 million.

Adjusted gross profit in the fourth quarter was $48.9 million, and adjusted gross margin was 54%. For the full year, adjusted gross profit was $187.7 million, and adjusted gross margin was 60.8%. Gross margins were a bit lower in Q4 than in prior quarters due to the impact of lower margin licensing revenue associated with the initial execution stages of the CCMI deal.

We made meaningful progress to narrow losses in 2019. For the fourth quarter, non-GAAP loss from continuing operations attributable to Synchronoss was $2.5 million, a decrease of 96.9% compared to a $80.8 million loss in the year ago quarter for the full year. It was $53.8 million compared to $176.9 million in 2018, a 69.6% decrease.

Adjusted EBITDA for the quarter was $6.5 million compared to $15.4 million in the fourth quarter of 2018, and up from $5.8 million in the third quarter of 2019. For the full year, adjusted EBITDA was $27.6 million compared to $14 million in 2018.

Turning to the balance sheet and cash flow statement. Cash and marketable securities totaled $39 million at year-end, up from $20 million at the end of the third quarter. The increase in cash was driven by a number of factors, including revenue from CCMI net of expenses, cash receipts from STI to reduce outstanding AR balances and the sale of unused IP addresses for approximately $5.5 million.

We also utilized $17 million from our Citibank supply chain financing. Note that we ended the quarter with no drawdowns under our revolving line of credit with Citizens Bank and $10 million of availability. Although we have not used this line of credit to date, in 2020, we do expect to utilize the line throughout the year based on fluctuations in working capital.

In addition, I'll note that we've done a good job managing our overseas cash and have reduced overseas balances to what we believe is the minimum level needed to support international operations. Our accounts receivable was $65.9 million at year-end. After fourth quarter payments and netting out all of the company's accounts, our balance sheet exposure to STI was down to approximately $6 million at quarter end. Net cash provided by operating activity for the year was $32 million compared to a $31.4 million use of cash last year.

Now I'll turn to guidance. In 2020, revenue is expected to be in the range of $320 million to $340 million, and EBITDA is expected to be in the range of $25 million to $35 million. As Glenn mentioned, like all companies, we are concerned with the coronavirus. And our guidance range currently contemplates a potential impact on our revenue with what we know today. Glenn mentioned what we are seeing presently, and if the coronavirus continues to impact the economy, there are additional cost-saving levers that we can pull.

Key to our assumptions is revenue and EBITDA contribution from new deals booked in 2019. We announced a number of new deals in 2019 and we expect to contribute to 2020 revenue. They include: CCMI, AT&T Cloud, TracFone, Assurant, Amazon, Wireless Advocates and others.

I'd like to provide a few details on a few of these deals. The contract with CCMI is expected to be a major revenue contributor for Synchronoss in the coming years, and we continue to expect this contract to exceed the value of our messaging initiative in Japan, both from an overall contract value standpoint and from the standpoint of its annual contribution to revenue and EBITDA.

We also see upside to the contract in a couple of ways, growth in messaging platform and sale of additional licenses, and additional professional service work. Of these, I'll note, we expect to see contributions from additional work in the first half of 2020. Investors know that Verizon is currently our largest customer and provides a significant portion of our cloud revenue. We are optimistic that the AT&T cloud deal can bring similar value to Synchronoss over time. However, it will take time as Verizon has been building its subscriber base since 2013.

And while TracFone, the largest MVNO in the United States, has a smaller customer base than Verizon and AT&T, we are optimistic of this new business win. TracFone is bundling cloud with their higher value plans and expected to grow into a meaningful customer and revenue contributor for Synchronoss.

In addition, the conventional wisdom that prepaid subscribers are a different demographic than postpaid is changing as more and more subscribers move to economical prepaid plans. Finally, most phones included in prepaid plans have lower onboard storage, increasing the importance of a cloud solution so subscribers can store valuable data and content.

One final note. The pervasive material weaknesses noted in our last 2 10-K reports are a result of the 2017 refile -- in 2018 refiling restatement have been remediated, and we believe there will be no pervasive material weakness noted in the 2019 Form 10-K, which we expect to be filed later this week.

Glenn will make a few closing remarks before we open the line for Q&A. Glenn?

Thank you, David. I just wanted to reiterate the 3 points, I started at the beginning of this call. We have the business and sales pipeline today that we expect to propel growth for 2020.

We are seeing renewed marketing energy from our existing cloud customers to promote and grow their cloud business, and we have 3 exciting new cloud customers in AT&T, TracFone and Assurant, that have launched -- that have all launched their cloud offering in Q1 of 2020. Obviously, this is encouraging for the future of our cloud business. We believe the launch of advanced messaging in the United States with CCMI and continued growth of the Plus Message platform in Japan will drive revenue momentum in the messaging business. In addition, our digital and IoT businesses are gaining momentum and expected to grow into major revenue contributors for Synchronoss, which will provide potential upside in 2020 and additional channel profitable growth in 2021. And we are continuing to take strong actions to optimize our expense base and continue our cost reduction efforts.

Our EBITDA guidance range for 2020 is reflective of additional cost savings that we have executed in the first quarter to position Synchronoss for profitable growth.

As we have mentioned, we are watching the impact of the coronavirus carefully. However, we believe we have a good plan of attack to move the business forward. And if needed, take out additional costs in the event that there is a lasting impact on the overall business.

All told, we are very excited about 2020. With that, let's take questions.

(Operator Instructions)

Our first question is from Mike Walkley from Canaccord.

Congratulations on the AT&T cloud announcement. Just a little more color, just given the experience with Verizon and having the top 2 carriers, how should we think about just 2020 impact from this contract versus maybe the other 5-year impact?

Mike, thank you for the question. I'll start and look to David. As David and I both said, we are really excited to have AT&T as a cloud partner. They obviously announced their launch today. So they're just getting started. And as we said, we do expect to see revenue in 2020. They're going to grow their cloud business from scratch, so from 0. And as we have talked about in the past, our economics and the business model is obviously a per subscriber model. So we will see that grow over the year. The excitement also is just how excited AT&T is about having this product in place and the ability to market this to their customers. So we're very optimistic.

And I'll let David jump in. As he stated, when you think about the overall impact of 3 new cloud customers, we obviously believe there's an opportunity for significant revenue growth as we -- in 2020 and especially '21 and '22.

Right. So yes, it's obviously embedded in our guidance expectation, Mike. It really depends on their marketing initiatives and how rapidly they grow. As we said, they're starting from a standing start.

Yes. Makes sense. And then just on Verizon, any update just on how that business is going with them and the timing for potential renewal dates with them coming up? Anything you can share along the Verizon contract.

I mean we're still experiencing the subscriber growth we expected. As I said, we basically -- because of 606, we basically spread that evenly throughout the life of the contract. So that's the only update really on the right.

Yes. Like I said in my comments, we've seen strong growth, obviously, in 2019, I mentioned the low teens, overall subscriber growth. We have a very, very strong relationship, obviously, with that team and excited about their marketing plans for 2020.

Great. And then I know, Glenn, you guys have done some things with Sprint and T-Mobile. With that merger moving forward, can you talk about maybe any opportunities or benefits that could have for Synchronoss?

Yes. We actually are in business with both today. I really can't talk too much, Mike, about go forward. You can imagine, they were obviously working very, very hard. And both of them in 2019, trying to get the deal done and consummated, and we hope to spend more time with them here early in the new year and see where that takes us.

Okay. Great. And then last question for me, just on the model. Just on the linearity for the year, it sounds like cloud should just grow over time as the new customers add subscribers. But anything you can share maybe on messaging with CCMI? Are there some milestones that will hit in different quarters? Or anything you could help us think about that linearity of the year towards your guidance?

Yes. Mike, I think as CCMI noted last year in their press releases when they just noted they would launch in 2020, once more information that comes out, I think we can get more specific around what that might look like by quarter. But for now, it's very difficult for us to do that.

Okay. Great. And this is the last question, I guess, just on the $15 million in additional cost savings you highlighted for '20, where should we expect to see that? Is that OpEx reductions or maybe some gross margin areas that you been-- that you've also attacking for COGS spin?

Yes. Probably both, Mike. We're continuing to get more efficient on both the COGS line and then also within SG&A.

Great. Well, congrats on some of the deal announcements and best wishes for 2020.

Thanks, Mike. Appreciate it.

Our next question is from Richard Baldry from Roth Capital.

Given the success you've had with the top carriers on the cloud front in the U.S., can you talk about whether there is similar potential globally with large-scale carriers, sort of what the differences would be to attack international markets versus the U.S.?

Yes. Absolutely. I appreciate the question. Yes, we, obviously, today, with our current set of customers, do cloud business in Europe. And we fully expect that the same types of issues, the same types of opportunities, the same reasons that I gave in my opening remarks that carriers are seeing are happening globally. So when you look at looking for incremental revenue and you look at how important the content on people's smartphones is, when you look at adding 5G and that really almost going to a lower -- arguably no latency, we see the same things happening globally. So without question, as you know, we spent a lot of time and effort in 2018 white labeling our cloud. We did that. So it would be, as I call it, a plug-and-play initiative. And we are definitely having conversations in Europe and Asia around this. So we expect to see more opportunities. We just launched 3 new clouds already in early 2020. And like I said, we're having good and constructive conversations with others around the world.

And you touched -- I'm sorry, quickly on Amazon expecting to get some of its first geographies up in the first quarter. Can you talk about your experiences with that to date? What a longer-term or second half 2020 outlook for that partnership would be?

Yes, I can. We are excited in the sense that we've completed our first and going through our first launch. Obviously, the launches have been pressed back a little bit from a time perspective. But we have our list of carriers that they've asked us to work with. We have dates, and we expect to make more announcements as we go through the early stages here of 2020.

As far as impact, if you recall, that business model is a revenue-share model based on subscriber. So similar comments that I'll make -- that we talk about with cloud. With each one of those implementations, we started -- we start from scratch and they go out and market. When we look at the list, we are optimistic that we will see revenue in 2020, and this will also be one of those great opportunities in a multiplier as we head into '21 and '22.

Great. And the last thing would be, in 2019, you sort of set up your model with an eye to discretionary $20 million to $25 million in spending, depending on successes and deal momentum that sort of tie that spending to the revenue growth. Have you done something similar in 2020? Or do you envision something similar in 2020? Or do you feel like you've got the momentum behind you with the wins that you put together now, so you can put sort of more of a baseline spend in and not have to try to hold that same flexibility like you tried to do in 2019?

Yes. Rich, it's the latter. So while we will be investing in the business, we actually expect to net out with a $15 million approximately expense cut at the end of the day. So we will be investing to support growth, but at the same time, pulling out costs to basically achieve approximately $15 million net reduction.

Yes. And I would only add that some of those investments in '19 were definitely onetime investments. And now we feel we have the ability to do the delivery -- to actually deliver on those deals that we have cut in '19 and what we believe we're going to be able to get done in '20.

Great. And congrats on the AT&T deal from me as well.

Thank you.

Our next question is from Sterling Auty from JPMorgan.

I wonder if you could provide some additional color on some of the renewals. You mentioned 3 of them that you've now extended or closed. What are the economics on those deals relative to what you have previously? Are they similar, up, down?

Yes. So the 3 you're talking about, remind everybody, obviously, were BT for 5 years, Proximus for 3, and SFR for 2. All 3 cloud deals and cloud partners. As David said, the way we do the majority of our cloud deals is on a per subscriber basis and per subscriber dollar amount. And so as we obviously push those out, we have to peanut butter that revenue over that period of time. So you can imagine that as you grow your base and as you go further out, the actual cost structures and rev shares on those per subscriber will be lower. So -- but you obviously get a longer tenure. So the impacts on those are pretty small, but there are impacts as you could tell by -- as David went through the numbers, we grew our subscribers in cloud, and we're basically flat year-over-year. And part of that was some of these obvious ability for us to renew these contracts.

Got it. And I think we all respect that you've taken your best shot at trying to estimate the coronavirus impact on the business. If I look at the midpoint of the range, I think, kind of flattish year-over-year. But what should we think about as the puts and takes in the different revenue segments within that guidance range in terms of what one's growing versus shrinking versus staying the same?

Yes. The midpoint of what we just issued is $330 million. So that is up from a $308 million we just announced, $309 million. So...

Sorry, sorry. My apologies. I was comparing the wrong things, but -- what are the puts and takes in terms of the growth rates in the different revenue segments within that $330 million?

As I said, we are expecting growth from a lot of the new deals we closed in 2019. And that really had an emphasis on the 3 new cloud deals and also the new messaging deals. So I think the primary drivers are those businesses.

Yes. And I would add this on your comment on coronavirus. My comments are this and what I said earlier, and I'll give a little more. Obviously, we're concerned first and foremost, about our employees and our customers. We are going to do everything we can to continue to drive the business. Like I said, we put together a strategy. Obviously, with Mobile World Congress being -- Barcelona being canceled, we are going and touching every single one of those customers that we had planned to talk to, and we've been in the process of doing that. So we're just, I think, like most of the companies around the globe, we're just going to have to operate differently for a while. And so we'll utilize technology in video and do a lot less traveling and a lot less face-to-face, but we believe we formulated a really solid plan to continue to move the business forward.

And our next question is from Orin Hirschman from AIGH Investment Partners.

Congratulations on the progress. In terms of Japan, and in terms of actually, seeing the next steps there, whether it's additional subscribers and coming back for additional licenses or whether it's actually seeing B2B and B2C advertising revenue and the like being monetized, what's the time frame perhaps look like? Has that time frame been pushed back a little bit?

Yes. I think you broke up a little bit, Orin, but I think your first question was about Japan and the revenue and what we think we'll see. At this point, obviously, the focus there is on licenses and volume is what's happening in Japan. As we stated and I will restate, they came out that the 3 carriers and talked about hitting 13 million subscribers. The goal of getting to 40 million subscribers by the end of '21, obviously, significant for us from a standpoint of that volume that we're looking for in the licensing revenue. Obviously, we will continue to work with the carriers and other aspects of messaging that we've talked about and that the platform can do, but that's really the focus right now.

Okay. And in terms of the -- taking it to the next step, in terms of advertising revenues that are shared B2B, B2C, I know you've done some small trials, what's the latest uptake there?

Yes. We have done some very good productive trials. We've learned a lot. We've also done some trials in other parts of the world as well. And we're in the process of working through that. As you know, we have a thing called an MMP, which is the messaging marketplace, that is part of our platform, that is exciting. It's an onboarding portal for the brands. We are definitely looking forward to having more conversations about that and timing. But that's really all I can say at this point, Orin.

Okay. Do you think there's more this year though in terms of that rollout?

Yes, we don't know. I mean I really can't speculate that far out other than what we talked about on the licensing side. And when we have an opportunity, we'll talk more about that.

Okay. And just one additional follow-up question. On the CCMI, you'd mentioned that there's more programming going on. Can you elaborate at all on that, particularly you said in the first half of 2020?

I was referring to actually additional professional services work, Orin, that we expect to happen in the first half of the year, yes.

Is that -- it sounded like it was more than you originally expected. Is that because of additional features, et cetera?

Yes. Yes. So...

Yes. That was -- it was a -- it's a bit more -- and also remember, with us having done this in Japan and having the expertise and the capabilities, we're going to support CCMI in any way they ask us to. And obviously, in this case, they've come to us for some support, and we'll continue to be their form and be the best partner we can be.

And we have reached the end of the question-and-answer session. And I will now turn the call back over to management for closing remarks.

Yes. Thank you very much. Again, thank you, everybody, for joining the call today. We appreciate you listening and support. And like I said in my comments, the team is very, very excited about where we are and positioned in 2020. And we look forward to talking to you again next quarter.

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.