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What changed in SYNCHRONOSS TECHNOLOGIES INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of SYNCHRONOSS TECHNOLOGIES INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+301 added−304 removedSource: 10-K (2024-03-25) vs 10-K (2023-03-15)

Top changes in SYNCHRONOSS TECHNOLOGIES INC's 2023 10-K

301 paragraphs added · 304 removed · 232 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeOur sales professionals are well versed in our platforms, products and services with an understanding of market trends, demands and conditions that our current and potential customers are facing. Marketing The Synchronoss marketing team’s mission is to deliver the right strategy, tools, and customer acquisition initiatives to accelerate our growth.
Biggest changeSales We sell our solutions, products, and services through a direct sales force, with strategic partners and in collaboration with our customers to resell services to their end customers and subscribers. Our sales professionals are well versed in our platforms, products and services with an understanding of market trends, demands and conditions that our current and potential customers are facing.
Our carrier branded Email Suite solution offers leading anti-virus and anti-spam and malware technology to keep the integrity and security of the customer experience and protection of subscriber data to carrier standards. Our Email solution is an important repository for critical communications with an intuitive and feature-rich mobile and desktop email experience ensuring stickiness and increasing customer lifetime value.
Our carrier branded Email Suite solution offers leading anti-virus, anti-spam and malware technology to keep the integrity and security of the customer experience and protection of subscriber data to carrier standards. Our Email solution is an important repository for critical communications with an intuitive and feature-rich mobile and desktop email experience ensuring stickiness and increasing customer lifetime value.
Our Mobile Messaging Platform (“MMP”) is poised to provide a single standard ecosystem for onboarding and management to brands, advertisers and message wholesalers. • Advanced Messaging: Our Advanced Messaging platform supports rich messaging channel in both RCS and other Real-Time Communication (“RTC”) and enables rich, P2P communications and creates new commerce and revenue opportunities across channels via A2P experiences for our customers and other brands.
Our Mobile Messaging Platform (“MMP”) is poised to provide a single standard ecosystem for onboarding and management to brands, advertisers and message wholesalers. • Advanced Messaging: Our Advanced Messaging platform supports rich messaging channel in both RCS and other Real-Time Communication (“RTC”); it enables rich, P2P communications and creates new commerce and revenue opportunities across channels via A2P experiences for our customers and other brands.
Our solution can transfer select data classes that may include photos, videos, music, messages, documents, contacts, and call logs, across operating systems including iOS and Android. 6 Table of Contents • Out of Box Experience: Our Synchronoss Out of Box Experience solution is a device setup solution that assists customers in setting up the features of their new device, including Wi-Fi, email, social network accounts and voicemail, as well as prompting restoration of content and enrollment in a cloud service.
Our solution can transfer select data classes that may include photos, videos, music, messages, documents, contacts, and call logs, across operating systems including iOS and Android. • Out of Box Experience: Our Synchronoss Out of Box Experience solution is a device setup solution that assists customers in setting up the features of their new device, including Wi-Fi, email, social network accounts and voicemail, as well as prompting restoration of content and enrollment in a cloud service.
We hold and/or are pursuing patents in the United States, Germany, the United Kingdom, France and Spain and we may seek additional jurisdictions to the extent we determine such coverage is appropriate and cost efficient. Our issued patents cover all aspects of our business including cloud, messaging, e-commerce, and security.
We hold and/or are pursuing patents in the United States, Germany, the United Kingdom, France and Spain and we may seek additional jurisdictions to the extent we determine such coverage is appropriate and cost efficient. Our issued patents cover all aspects of our business including cloud and security.
The Synchronoss NetworkX products provide operators with the tools and software to design their physical network, streamline their infrastructure purchases, and manage and optimize comprehensive network expenses for leading top tier carriers around the globe. • spatialNX: Our spatialSUITE provides enterprise-wide access to timely, accurate and comprehensive network information – including physical location, specifications, attributes, connectivity and capacity – for every inside-plant and outside-plant asset.
The Synchronoss NetworkX products provide operators with the tools and software to design their physical network, streamline their infrastructure purchases, and manage and optimize comprehensive network expenses for leading top tier carriers around the globe. • spatialNX: Our spatialSUITE provides enterprise-wide access to timely, accurate and comprehensive network information – including physical location, specifications, attributes, connectivity and capacity – for every inside-plant 6 Table of Contents and outside-plant asset.
We expect our research and development investments to increase as we intend to continue on an aggressive path to develop new features and functionality, upgrade and extend our product offerings and develop new technology.
We expect to sustain our research and development investments as we intend to continue on an aggressive path to develop new features and functionality, upgrade and extend our product offerings and develop new technology.
Intellectual Property We rely principally on a combination of trademark, copyright and patent laws in the United States and other jurisdictions in which we do business, as well as confidentiality procedures and contractual provisions, which protect our proprietary 7 Table of Contents information, technologies and strategies.
Intellectual Property We rely principally on a combination of trademark, copyright and patent laws in the United States and other jurisdictions in which we do business, as well as confidentiality procedures and contractual provisions, which protect our proprietary information, technologies and strategies.
We continue to invest in our employees, as well as developing and promoting our team-oriented culture, and believe that these efforts provide us with a sustainable competitive advantage. As of December 31, 2022 we had 1,391 full-time employees located in India, North America, Europe, and Asia Pacific regions.
We continue to invest in our employees, as well as developing and promoting our team-oriented culture, and believe that these efforts provide us with a sustainable competitive advantage. As of December 31, 2023 we had 1,321 full-time employees located in India, North America, Europe, and Asia Pacific regions.
We have used, and intend to continue to use, our investor relations website as a 10 Table of Contents means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD.
We have used, and intend to continue to use, our investor relations website as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD.
We enter into proprietary information and invention agreements with all of our employees and consultants during the onboarding process and non-disclosure agreements with all third parties. In the United States, as of December 31, 2022 we had 71 patents issued and 7 patents pending. Internationally, as of December 31, 2022 we had 75 patents issued and 6 pending.
We enter into proprietary information and invention agreements with all of our employees and consultants during the onboarding process and non-disclosure agreements with all third parties. In the United States, as of December 31, 2023 we had 45 patents issued and 7 patents pending. Internationally, as of December 31, 2023 we had 70 patents issued and 6 pending.
OnboardX products simplify subscriber onboarding and drive service adoption at scale . The first impression of a new product or service can either make or break your subscriber relationship. A poor onboarding experience leads to revenue losses and customers feeling stranded.
OnboardX (Owned and operated through October 31, 2023) products simplify subscriber onboarding and drive service adoption at scale . The first impression of a new product or service can either make or break your subscriber relationship. A poor onboarding experience leads to revenue losses and customers feeling stranded.
More devices will lead to more vulnerabilities around privacy, data, and hardware protection. Consumers have made it clear; they want to understand and feel confident about how their data is being used. Service providers have proven themselves true stewards of consumer data protection and privacy, and therefore differentiated as the market continues to develop.
Consumers have made it clear; they want to understand and feel confident about how their data is being used. Service providers have proven themselves true stewards of consumer data protection and privacy, and therefore differentiated as the market continues to develop.
We have a purpose-driven culture, with a focus on employee input and well-being, which we believe enables us to attract and retain exceptional talent. We have moved to a flexible work policy, providing the majority of our employees the flexibility to work remotely from off-site locations at their election. We offer learning and development programs for all employees.
We have a purpose-driven culture, with a focus on employee input and well-being, which we believe enables us to attract and retain exceptional talent. We have moved to a flexible work policy, providing the majority of our employees the flexibility 9 Table of Contents to work remotely from off-site locations at their election.
However, these providers target second and third tier regional operators with low-risk, revenue share business models and do not generally pose a real threat to Tier 1 world-wide Operators. Messaging • The emerging RCS marketplace is intensely competitive across the globe.
However, these providers target second and third tier regional operators with low-risk, revenue share business models and do not generally pose a real threat to Tier 1 world-wide Operators. 8 Table of Contents Messaging (Owned and operated through October 31, 2023) • The emerging RCS marketplace is intensely competitive across the globe.
We help our customers to connect, engage and monetize subscribers in more meaningful ways by providing trusted platforms through which end users can sync and store content and connect with one another and the brands they love. Our mission is to help our customers create new revenue streams, reduce the cost of innovation, and captivate their subscribers.
We help our customers to connect, engage and monetize subscribers in more meaningful ways by providing trusted platforms through which end users can sync, organize and protect all of their digital content, connect with one another and enjoy precious memories. Our mission is to help our customers create new revenue streams, reduce the cost of innovation, and captivate their subscribers.
Compliance and Certifications We obtain third-party reviews of our controls relating to security. Our Synchronoss white label Personal Cloud has been certified to be compliant with the Service Organization Controls (SOC) 2 type II audit that tests the design and operating effectiveness of controls over time.
Our Synchronoss white label Personal Cloud has been certified to be compliant with the Service Organization Controls (SOC) 2 type II audit that tests the design and operating effectiveness of controls over time.
Employees are able to actively voice their questions and thoughts through many internal channels, including our company town hall meetings and employee engagement surveys.
We offer learning and development programs for all employees. Employees are able to actively voice their questions and thoughts through many internal channels, including our company town hall meetings and employee engagement surveys.
The Synchronoss Personal Cloud TM platform is a secure and highly scalable, white label platform that allows our customers’ subscribers to backup and protect, engage with, and manage their personal content and gives our operator customers the ability to increase average revenue per user (“ARPU”) and reduce churn.
The Synchronoss Personal Cloud TM platform is a secure and highly scalable, white label platform that allows our customers’ subscribers to backup and protect, engage with, and manage their personal content and gives our operator customers the ability to increase average revenue per user (“ARPU”) and reduce churn. 5 Table of Contents Our Synchronoss Personal Cloud TM platform is specifically designed to support smartphones, tablets, desktops computers, and laptops.
Digital Products • Telecom Expense Management (TEM) Providers – ▪ TEOCO and Tangoe are two major providers that offer wholesale and retail TEM software and services.
Digital Products (Owned and operated through October 31, 2023) • Telecom Expense Management (TEM) Providers – ▪ TEOCO and Tangoe are two major providers that offer wholesale and retail TEM software and services.
Each of these vendors have large customers/contracts to better account, reconcile and pay out on vendor contracts, network circuits, roaming agreements and other complex expense areas. • Telecom Service Order Management Providers – ▪ Neustar supports major providers with software that handles the full order lifecycle of telecommunications service orders. ▪ Order management applications and processes developed/utilized by Operators also present competition. • Geospatial Network Planning Providers – ▪ Major providers of software that manage the planning and design of physical communication networks include Bentley, GE Smallworld, and 3-GIS. 9 Table of Contents To compete against global platform providers, we offer a collection of products that help to keep subscribers, systems, networks, and content in sync to enable a better, more engaging experience.
Each of these vendors have large customers/contracts to better account, reconcile and pay out on vendor contracts, network circuits, roaming agreements and other complex expense areas. • Telecom Service Order Management Providers – ▪ Neustar supports major providers with software that handles the full order lifecycle of telecommunications service orders. ▪ Order management applications and processes developed/utilized by Operators also present competition. • Geospatial Network Planning Providers – ▪ Major providers of software that manage the planning and design of physical communication networks include Bentley, GE Smallworld, and 3-GIS.
According to Market Research Future, Mobile Value-Added-Services (“VAS”) are set to hit $309.1 billion by 2025. The transition to 5G provides an opportunity to strengthen their position in the consumer market and function as a service enabler by bundling VAS into premium offers. Service providers should also become service creators by developing new, immersive products under their own brand.
According to Market Research Future, Mobile Value-Added-Services (“VAS”) are set to hit $309.1 billion by 2025. The transition to 5G provides an opportunity to strengthen their position in the consumer market and function as a service 7 Table of Contents enabler by bundling VAS into premium offers.
Our Advanced Messaging platform is a powerful, secure , intelligent, white label messaging platform that expands capabilities for communications service provider and multi-service providers to offer P2P messaging via Rich Communications Services (“RCS”).
Messaging Platform (Owned and operated through October 31, 2023) Synchronoss’ Messaging platform powers mobile messaging and mailboxes for hundreds of millions of telecommunication subscribers. Our Advanced Messaging platform is a powerful, secure , intelligent, white label messaging platform that expands capabilities for communications service provider and multi-service providers to offer P2P messaging via Rich Communications Services (“RCS”).
Our Cloud and Messaging experiences grow, inspire, and build loyalty with our customers’ subscriber base. Synchronoss Personal Cloud TM Platform The Synchronoss Personal Cloud TM solution is designed to create an engaging and trusted customer experience through ongoing content management and engagement.
What We Deliver - Synchronoss Personal Cloud TM Platform The Synchronoss Personal Cloud TM solution is designed to create an engaging and trusted customer experience through ongoing content management and engagement.
Our customers market and re-sell the services powered by our technology to their subscribers as part of stand-alone subscriptions, value-added bundles, or use Personal Cloud to enhance their service offerings to subscribers who purchase and lease mobile devices and network connectivity by providing an easy solution for storing and syncing user generated content (e.g., videos, photos, documents, contacts, music etc.).
They also use our Personal Cloud to enhance their service offerings to subscribers who purchase and lease mobile devices and network connectivity by providing an easy solution for storing and syncing user generated content (e.g., videos, photos, documents, contacts, music, etc.). Our customers include global service providers such as AT&T, BT, Verizon, and Softbank.
It also offers the ability to highlight programs and revenue generating initiatives during the setup process, such as loyalty programs, third-party partnerships and value-added services. NetworkX products streamline networks to be more efficient and profitable. In a world where subscribers expect seamless connectivity and zero network interruptions, delivering superior network quality can be complex and costly.
It also offers the ability to highlight programs and revenue generating initiatives during the setup process, such as loyalty programs, third-party partnerships and value-added services. NetworkX (Owned and operated through October 31, 2023) products streamline networks to be more efficient and profitable.
How We Go to Market We market our solutions and services directly through our sales organizations in the Americas, Europe, Middle East and Africa (“EMEA”) and Asia-Pacific (“APAC”). Sales We sell our solutions, products, and services through a direct sales force, with strategic partners and in collaboration with our customers to resell services to their end customers and subscribers.
These customers utilize our solutions to service both consumer and enterprise customers. How We Go to Market We market our solutions and services directly through our sales organizations in the Americas, Europe, Middle East and Africa (“EMEA”) and Asia-Pacific (“APAC”).
Giving subscribers the ability to protect hardware investments with insurance plans, protect their families from cyber threats with network-based security services, and their personal content - with cloud, will differentiate the value proposition of 5G service plans and deliver significant brand value for our customers. _____________________________ 1 Ericsson June 2022 Mobility Report Competition Competition across our markets is incredibly diverse, dynamic and nuanced in an increasingly interconnected landscape of rapidly changing technologies, evolving industry standards, new product introductions and converging spaces and services.
Giving subscribers the ability to protect hardware investments with insurance plans, protect their families from cyber threats with network-based security services, and their personal content - with cloud, will differentiate the value proposition of 5G service plans and deliver significant brand value for our customers.
In 2027, it is projected that North America will have the highest 5G penetration at 90 percent. 5G adoption among mid-tier smart phones also continues to abound with new devices and capabilities as evidenced by the numerous device demonstrations we saw at Mobile World Congress 2022. 5G will also usher in many more connected device types.
In 2027, it is projected that North America will have the highest 5G penetration at 90 percent. 5G adoption among mid-tier smart phones also continued to abound as new devices and capabilities were introduced by mobile phone manufacturers in 2023. More devices will lead to more vulnerabilities around privacy, data, and hardware protection.
When operators have millions of active users leveraging cloud, it 8 Table of Contents becomes a channel for cross selling security services, insurance, merchandise like prints & gifts, and other carrier services, leading to a significant increase in ARPU. As a result, we are fostering new partnerships, building exciting new capabilities, and now enabling subscribers to protect the home.
Our next generation Personal Cloud gives operators a new way to create, deliver, engage, and monetize more personalized experiences and offers for their subscribers. When operators have millions of active users leveraging cloud, it becomes a channel for cross selling security services, insurance, merchandise like prints & gifts, and other carrier services, leading to a significant increase in ARPU.
Our white label products enable subscribers to connect with one another, the networks they rely on, the brands they love and the services they need. We believe we compete favorably through our differentiated product capabilities, vast reach across global markets, and our 20+ years of experience building carrier grade solutions that are proven to scale.
We believe we compete favorably through our differentiated product capabilities, vast reach across global markets, and our 20+ years of experience building carrier grade solutions that are proven to scale. Compliance and Certifications We obtain third-party reviews of our controls relating to security.
Our physical network asset management, off-network procurement, and expense control solutions reduce the complexity and cost of network management.
In a world where subscribers expect seamless connectivity and zero network interruptions, delivering superior network quality can be complex and costly. Our physical network asset management, off-network procurement, and expense control solutions reduce the complexity and cost of network management.
In either case (branded and partner services) powering digital bundles and simplifying onboarding, consumption, billing, and authentication of VAS will drive higher adoption of premium 5G service plans and ARPU. Beyond being a buzz word or strategy, 5G is the next wave in Communication Service Providers’ technological future.
Service providers should also become service creators by developing new, immersive products under their own brand. In either case (branded and partner services) powering digital bundles and simplifying onboarding, consumption, billing, and authentication of VAS will drive higher adoption of premium 5G service plans and ARPU.
Who We Serve At Synchronoss we focus on delivering carrier-grade solutions to three markets globally: communications service providers/multi-service operators (such as cable and mobile network operators), mobile insurance providers and retailers. We help our customers accelerate and monetize value-add services to drive growth, facilitate retention and enable differentiated experiences.
Divestitures and Discontinued Operations of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K. Who We Serve At Synchronoss we focus on delivering carrier-grade solutions to three markets globally: communications service providers/multi-service operators (such as cable and mobile network operators), mobile insurance providers and retailers.
The consumer demand around personal cloud data protection, hardware insurance, home and network security will allow service providers to capitalize on their trusted relationship with consumers. As 5G becomes more saturated in the marketplace, it will drive a need to address the growing cyber-risks that ubiquitous, always-on high-speed access present to organizations.
The consumer demand around personal cloud data protection, hardware insurance, home and network security will allow service providers to capitalize on their trusted relationship with consumers. We believe our white label Personal Cloud platform helps service providers accelerate the adoption of 5G service and total protection plans.
In 2022, we continued to strengthen our focus through the asset sale of our Digital Experience Platform (the “DXP Business”) to iQmetrix. Communications service providers, multi-service operators and mobile insurance providers market white label implementations of our Synchronoss Personal Cloud TM , Advanced Messaging and email products and solutions to their subscribers around the world.
Communications service providers, multi-service operators and mobile insurance providers market white label implementations of our Synchronoss Personal Cloud TM products and solutions to their subscribers around the world. Our customers market and re-sell the services powered by our technology to their subscribers as part of stand-alone subscriptions or value-added bundles.
SyncX keeps people, systems, networks, and content in sync to enable a better, more engaging experience. EngageX products keep subscribers engaged with brands, content and people they love. When loyalty and revenue is won and lost through every experience, it is critical to offer value-added services subscribers love.
To compete against global platform providers, we offer a collection of products that help to keep subscribers, systems, networks, and content in sync to enable a better, more engaging experience. Our white label products enable subscribers to connect with one another, the networks they rely on, the brands they love and the services they need.
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ITEM 1. BUSINESS Overview Synchronoss is a leading provider of white label cloud, messaging, digital and network management solutions that enable our customers to keep subscribers, systems, networks and content in sync.
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ITEM 1. BUSINESS Overview Synchronoss Personal Cloud TM is an innovative software that drives revenue growth and consumer engagement for global network operators and mobile insurance providers.
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Our core product sets allow our customers to create a positive experience throughout their subscribers’ lifecycle by engaging, onboarding and managing the network to ensure reliable service. • EngageX: ▪ Personal Cloud: Backup, manage and engage with content. ▪ A dvanced Messaging: multi-channel messaging, peer-to-peer (“P2P”) communications and application-to-person (“A2P”) commerce solutions. ▪ Email Suite: White label consumer email solutions. • OnboardingX: ▪ Backup and Restore: Backup, view and restore subscriber content across operating systems and devices. ▪ Out of Box Experience: Streamline the activation of new services and devices. ▪ Content Transfer: Effortlessly move content between mobile devices. 4 Table of Contents • NetworkX: ▪ NetworkX: integrated application suite that designs, procures, manages and optimizes telecom network infrastructure.
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Divestiture of the Messaging and NetworkX businesses On October 31, 2023, Synchronoss Technologies, Inc. entered into an Asset Purchase Agreement with Lumine Group Software Solutions (Ireland) Limited, pursuant to which the Company sold its Messaging and NetworkX businesses. This transaction represents a strategic shift designed to maximize shareholder value and allow the Company to solely focus on providing cloud-centric solutions.
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Additionally, they license Synchronoss Advanced Messaging and Email to enable white label multichannel messaging services including advanced person-to-person (“P2P”) and application-to-person (“A2P”) transactions and to offer brand/advertiser ecosystems. Communications service providers and multi-service operators use our OnboardX and NetworkX solutions to enhance their subscriber journeys and onboarding and to streamline their internal processes.
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In connection with the sale transaction, the Company determined its Messaging and NetworkX Businesses qualified for discontinued operations accounting treatment in accordance with ASC 205-20. Accordingly, the operating results of, and costs to separate the Messaging and NetworkX businesses are reported in Net loss from discontinued operations, net of taxes in the Consolidated Statements of Operations for all periods presented.
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Our customers include global service providers such as AT&T, BT, Verizon, Softbank and multi-service operators like Comcast, Altice, Charter and Mediacom. These customers utilize our solutions to service both consumer and enterprise customers.
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In addition, the related assets and liabilities held prior to the sale are reported as Assets and liabilities of discontinued operations on the Consolidated Balance Sheets. The notes to the financial statements have been adjusted on a retrospective basis. For additional 4 Table of Contents information, see Note 4.
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The team uses a combination of product-specific and company-wide marketing messages and initiatives that leverage digital marketing campaigns, sales support materials, social media, and PR to generate top of the funnel business-to-business (“B2B”) sales leads for the sales team.
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We help our customers accelerate and monetize value-added services to drive growth, facilitate retention and enable differentiated experiences. In 2023, we continued to strengthen our focus through the asset sale of our Messaging and Digital businesses to Lumine.
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As a result, they play a vital role in promoting our products, discovering new markets, and driving brand awareness in the North America, EMEA, and APAC regions. The Marketing team also supports our customers’ direct-to-consumer (D2C) marketing efforts for all global cloud deployments.
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Marketing The Synchronoss marketing team, with our cloud-focused approach, is dedicated to implementing the right strategies and employing effective tools to drive customer acquisition and accelerate our growth. Our mission is centered on developing compelling product-specific messaging and comprehensive brand narratives through an array of channels, including digital marketing, sales support, social media, and public relations.
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In partnership with our customers, our go-to-market and awareness campaigns consist of a digitally-led omnichannel approach at critical moments in the subscriber’s purchase lifecycle; including online checkout, retail transactions, customer care interactions, out-of-box setup experiences, and in-app notifications for devices that have our cloud app preloaded. 5 Table of Contents What We Deliver - Our Platforms The Synchronoss Experience (syncX) is a collection of products that help our customers create a positive brand experience throughout the subscriber lifecycle.
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These strategic efforts are crucial in generating business-to-business (B2B) sales leads, enhancing the visibility of our cloud solutions, and reinforcing our brand presence across the telecom, insurance, and retail sectors in the North America, EMEA, and APAC regions.
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Our Synchronoss Personal Cloud TM platform is specifically designed to support smartphones, tablets, desktops computers, laptops, wearables for health and wellness, cameras, TVs, security cameras, routers, as well as connected automobiles and homes. Messaging Platform Synchronoss’ Messaging platform powers mobile messaging and mailboxes for hundreds of millions of telecommunication subscribers.
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To complement our B2B initiatives, we provide robust support for our partners' direct-to-consumer (D2C) marketing activities, with the aim of driving customer adoption and subscriber growth. Through our integrated go-to-market and awareness campaigns, orchestrated with an omnichannel approach, we ensure that consumers are engaged at every pivotal point in the purchase lifecycle.
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In 2023, we expect to see continued adoption of 5G use cases and Operators starting to reap returns on their investment in 5G technology. According to Ericsson 1 , 5G subscriptions grew by 70 million during the first quarter of 2022 to around 620 million and are expected to surpass 1 billion by the end of 2022.
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This includes interactions during online checkout, retail engagements, customer support, the initial setup of products, and via in-app notifications for devices pre-installed with our cloud application.
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In fact, according to the “Deloitte 2021 Connectivity and Mobile Trends Survey”, the average US household has 25 connected devices across 14 categories, up from 11 categories when last measured in 2019. In addition, the number of connected devices globally is estimated to reach 38.6 billion in 2025, up from 22 billion in 2018.
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These initiatives are a clear demonstration of our dedication to delivering not only a secure and user-centric cloud experience but also to empowering service providers and consumers alike with a platform that champions data integrity and propels user engagement.
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Operators have taken steps to secure the technology's transmission or network segments; however, the threats posed by the endpoints connecting to those networks and the data resident upon them provide a unique opportunity to develop technologies to address this gap.
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Beyond being a buzz word or strategy, 5G is the next wave in Communication Service Providers’ technological future. In 2023, we saw the continued adoption of 5G use cases and Operators begin to reap returns carriers were reliant on when making their investment in 5G technology.
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The addressable market for device protection and cloud data storage for these connected devices will continue to increase and presents a hole in coverage that the average consumer still needs to recognize.
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As a result, we are fostering new partnerships, building exciting new capabilities, and now enabling subscribers to protect the home.
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Organizations that provide services and software for 5G networks, providers, and consumers are in an enviable position to offer security services to ensure the integrity and availability of the data generated by those connected devices and security services to protect those devices.
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Personal Cloud and its data protection value proposition fits nicely into the device protection and insurance offering. Insurance providers bundle personal cloud with the device protection to offer total device protection.
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Consequently, as we enter the next 12-18 months, operators and providers will look to this whitespace to boost functionality and services for their customers to position themselves as the security provider of choice for consumers for 5G-connected devices. We believe our white label Personal Cloud platform helps service providers accelerate the adoption of 5G service and total protection plans.
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Cable MSO and broadband service providers have a unique opportunity to offer personal cloud as an ‘all home’ data protection offering which increases ARPU and provides the much needed access to the home service provider market beyond being a connectivity and content provider.
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The next generation Personal Cloud gives operators a new way to create, deliver, engage, and monetize more personalized experiences and offers for their subscribers.
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In addition, service providers also can include personal cloud into a security bundle where consumers get data protection combined with other features like anti-virus, password protection, VPN and more. _____________________________ 1 Ericsson June 2022 Mobility Report Competition Competition across our markets is incredibly diverse, dynamic and nuanced in an increasingly interconnected landscape of rapidly changing technologies, evolving industry standards, new product introductions and converging spaces and services.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeConsequently, any gains from an investment in our common stock will likely depend on whether the price of our common stock increases. • Delaware law and provisions in our restated certificate of incorporation and amended and restated bylaws could make a merger, tender offer or proxy contest difficult, therefore depressing the trading price of our common stock. • We have incurred (and expect to continue to incur) significant costs in connection with the restatement of previously issued consolidated financial statements. 12 Table of Contents • Our current or future debt securities or preferred equity securities, which would be senior to our common stock, may adversely affect the market price of our common stock. • B.
Biggest changeLegal, Regulatory and Compliance Risks • Government regulation of the Internet and e-commerce and of the international exchange of certain information is subject to possible unfavorable changes, and our failure to comply could harm our business and operating results. • We collect, process, store, disclose and use personal information and other data, and our perceived failure to protect this information and data could damage our reputation and harm our business and operating results. • If we are required to collect sales and use taxes on the services we previously sold in additional jurisdictions, we may be subject to liability for past sales. 11 Table of Contents Risks Related to our Series B Preferred Stock, Senior Notes and Common Stock • Our stock price may continue to experience significant fluctuations and could subject us to litigation. • We have, and in the future may be, the target of stockholder derivative complaints or other securities related legal actions that could adversely affect our results of operations and our business. • Delaware law and provisions in our restated certificate of incorporation and amended and restated bylaws could make a merger, tender offer or proxy contest difficult, therefore depressing the trading price of our common stock. • We have incurred (and expect to continue to incur) significant costs in connection with the restatement of previously issued consolidated financial statements. • Our current or future debt securities or preferred equity securities, which would be senior to our common stock, may adversely affect the market price of our common stock. • B.
A successful assertion by one or more tax authorities that we should collect sales or other taxes on the sale of our services could result in substantial tax liabilities for past sales, including interest and penalty charges, and could discourage customers from purchasing our services and otherwise harm our business.
A successful assertion by one or more tax authorities that we should collect sales or other taxes on the previous sale of our services could result in substantial tax liabilities for past sales, including interest and penalty charges, and could discourage customers from purchasing our services and otherwise harm our business.
Although our customer contracts typically provide that our customers are responsible for the payment of all taxes associated with the provision and use of our services, customers may decline to pay back taxes and may refuse responsibility for interest or penalties associated with those taxes. In certain cases, we may elect not to request customers to pay back taxes.
Although our previous customer contracts typically provide that our customers are responsible for the payment of all taxes associated with the provision and use of our services, customers may decline to pay back taxes and may refuse responsibility for interest or penalties associated with those taxes. In certain cases, we may elect not to request customers to pay back taxes.
In addition, non-GAAP metrics we may disclose, such as Adjusted EBITDA, Invoiced Cloud Revenue, and any corresponding trends in such metrics should not be relied on as an indication that our GAAP results, such as net income (loss), will be similar or will follow the same trends.
In addition, non-GAAP metrics we may disclose, such as Adjusted EBITDA, Invoiced Revenue, and any corresponding trends in such metrics should not be relied on as an indication that our GAAP results, such as net income (loss), will be similar or will follow the same trends.
Our amended and restated certificate of incorporation and bylaws: • authorize the issuance of “blank check” preferred stock that could be issued by our board of directors to thwart a takeover attempt; • prohibit cumulative voting in the election of directors, which would otherwise allow holders of less than a majority of the stock to elect some directors; • establish a classified board of directors as a result of which successor to a director whose term has expired will be elected to serve from the time of election and qualification until the third annual meeting following election; • require that directors only be removed from office for cause; • provide that vacancies on the board of directors, including newly created directorships, may be filled only by a majority vote of directors then in office; • limit who may call special meetings of stockholders; • prohibit stockholder action by written consent, requiring all actions to be taken at a stockholder meeting; and • establish advance notice requirements for nominating candidates for election to the board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings.
Our amended and restated certificate of incorporation and bylaws: • authorize the issuance of “blank check” preferred stock that could be issued by our board of directors to thwart a takeover attempt; • prohibit cumulative voting in the election of directors, which would otherwise allow holders of less than a majority of the stock to elect some directors; • establish a classified board of directors as a result of which successor to a director whose term has expired will be elected to serve from the time of election and qualification until the third annual meeting following election; • require that directors only be removed from office for cause; • provide that vacancies on the board of directors, including newly created directorships, may be filled only by a majority vote of directors then in office; 35 Table of Contents • limit who may call special meetings of stockholders; • prohibit stockholder action by written consent, requiring all actions to be taken at a stockholder meeting; and • establish advance notice requirements for nominating candidates for election to the board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings.
It is not clear that our services are subject to sales and use tax in certain jurisdictions. States and certain municipalities in the United States, as well as countries outside the United States, have different rules and regulations governing sales and use taxes.
It is not clear that our previous services are subject to sales and use tax in certain jurisdictions. States and certain municipalities in the United States, as well as countries outside the United States, have different rules and regulations governing sales and use taxes.
This business model depends heavily on achieving economics of scale due to the initial upfront investment, and the associated revenue is recognized on a ratable basis. Our customers typically have no contractual obligation to renew their subscriptions after completion of their then-current subscription term . We may be unable to predict future customer renewal rates accurately.
This business model depends heavily on achieving economies of scale due to the initial upfront investment, and the associated revenue is recognized on a ratable basis. Our customers typically have no contractual obligation to renew their subscriptions after completion of their then-current subscription term . We may be unable to predict future customer renewal rates accurately.
If our systems fail or are breached as a result of a third-party attack or an error, violation of internal controls or policies or a breach of contract by an employee, consultant or subcontractor that results in the unauthorized use or disclosure of proprietary or confidential information or customer data (including information about the existence and nature of the projects and transactions our customers are engaged 19 Table of Contents in), we could lose business, suffer irreparable damage to our reputation and incur significant costs and expenses relating to the investigation and possible litigation of claims relating to such event.
If our systems fail or are breached as a result of a third-party attack or an error, violation of internal controls or policies or a breach of contract by an employee, consultant or subcontractor that results in the unauthorized use or disclosure of proprietary or confidential information or customer data (including information about the existence and nature of the projects and transactions our customers are engaged in), we could lose business, suffer irreparable damage to our reputation and incur significant costs and expenses relating to the investigation and possible litigation of claims relating to such event.
Also on June 7, 2022, the SEC filed a civil action against two former members of the Company’s management team, alleging misconduct arising out of the restated transactions that took place in 2015 and 2016 investigated by the SEC as set forth above. We may be required to indemnify the former members of management in that action.
Also on June 7, 2022, the SEC filed a civil action against two former members of our management team, alleging misconduct arising out of the restated transactions that took place in 2015 and 2016 investigated by the SEC as set forth above. We may be required to indemnify the former members of management in that action.
We are subject to revenue recognitions standards and because we recognize revenue for certain products and services ratably over the term of customer agreements upturns or downturns in the value of signed contracts will not be fully and immediately reflected in our operating results and any changes in the standards could impact our business.
We are subject to revenue recognition standards and because we recognize revenue for certain products and services ratably over the term of customer agreements upturns or downturns in the value of signed contracts will not be fully and immediately reflected in our operating results and any changes in the standards could impact our business.
In addition, the increasing size and scope of our operations increase the possibility that a member of our personnel will engage in unlawful or fraudulent activity, breach our contractual obligations, or otherwise expose us to unacceptable business risks, despite our efforts to train our people and maintain internal controls to prevent such instances.
In addition, the increasing size and scope of our operations increases the possibility that a member of our personnel will engage in unlawful or fraudulent activity, breach our contractual obligations, or otherwise expose us to unacceptable business risks, despite our efforts to train our people and maintain internal controls to prevent such instances.
Historically, with a few exceptions, we have not charged or collected value added tax on our services anywhere in the world. We may lose sales or incur significant expenses should tax authorities in other jurisdictions where we do business be successful in imposing sales and use taxes, value added taxes or similar taxes on the services we provide.
Historically, with a few exceptions, we have not charged or collected value added tax on our services anywhere in the world. We may lose sales or incur significant expenses should tax authorities in other jurisdictions where we do business be successful in imposing sales and use taxes, value added taxes or similar taxes on the services we provided.
The Company may be required to indemnify the former members of the Company’s management team for a loss. Although we maintain insurance for claims of this nature, our insurance coverage does not apply in all circumstances and may be denied or insufficient to cover the costs related to the class action and stockholder derivative lawsuits.
We may be required to indemnify the former members of our management team for a loss. Although we maintain insurance for claims of this nature, our insurance coverage does not apply in all circumstances and may be denied or insufficient to cover the costs related to the class action and stockholder derivative lawsuits.
In particular, our growth will increase the challenges involved in: • recruiting, training and retaining technical, finance, marketing and management personnel with the knowledge, skills and experience that our business model requires; • maintaining high levels of customer satisfaction; • developing and improving our internal administrative infrastructure, particularly our financial, operational, communications and other internal systems; • preserving our culture, values and entrepreneurial environment; and 24 Table of Contents • effectively managing our personnel and operations and effectively communicating to our personnel worldwide our core values, strategies and goals.
In particular, our growth will increase the challenges involved in: • recruiting, training and retaining technical, finance, marketing and management personnel with the knowledge, skills and experience that our business model requires; • maintaining high levels of customer satisfaction; • developing and improving our internal administrative infrastructure, particularly our financial, operational, communications and other internal systems; • preserving our culture, values and entrepreneurial environment; and • effectively managing our personnel and operations and effectively communicating to our personnel worldwide our core values, strategies and goals.
If we are unable to develop and offer features that meet legal requirements or help our customers meet their obligations under the laws or regulations relating to privacy, data protection, or information security, or if we violate or are perceived to violate any laws, regulations, or other obligations relating to privacy, data protection, or information security, we may experience reduced demand for our offerings, harm to our reputation, and become subject to investigations, claims, and other remedies, which would expose us to significant fines, penalties, and other damages, all of which would harm our business.
If we are unable to develop and offer features that meet legal requirements or help our customers 30 Table of Contents meet their obligations under the laws or regulations relating to privacy, data protection, or information security, or if we violate or are perceived to violate any laws, regulations, or other obligations relating to privacy, data protection, or information security, we may experience reduced demand for our offerings, harm to our reputation, and become subject to investigations, claims, and other remedies, which would expose us to significant fines, penalties, and other damages, all of which would harm our business.
Our competitors include firms that provide comprehensive information systems and managed services solutions, BYOD providers, systems integrators, clearinghouses and service bureaus. Many of our competitors have long operating histories, large customer bases, substantial financial, technical, sales, marketing and other resources and strong name recognition.
Our competitors include firms that provide comprehensive SaaS solutions and managed services solutions, BYOD providers, systems integrators, clearinghouses and service bureaus. Many of our competitors have long operating histories, large customer bases, substantial financial, technical, sales, marketing and other resources and strong name recognition.
As the enforcement landscape further develops, supervisory authorities issue further guidance on international data transfers, and governments work to reach agreements on additional transfer mechanisms, 31 Table of Contents we may experience additional costs, complaints and/or regulatory investigations or fines; we may have to stop using certain tools and vendors and make other operational changes; we have had to and will have to implement revised SCCs for existing customer and vendor arrangements within required time frames; and/or it could otherwise affect the manner in which we provide our services, and could adversely affect our business, operations and financial condition.
As the enforcement landscape further develops, supervisory authorities issue further guidance on international data transfers, and governments work to reach agreements on additional transfer mechanisms, we may experience additional costs, complaints and/or regulatory investigations or fines; we may have to stop using certain tools and vendors and make other operational changes; we have had to and will have to implement revised SCCs for existing customer and vendor arrangements within required time frames; and/or it could otherwise affect the manner in which we provide our services, and could adversely affect our business, operations and financial condition.
Risk Factors Summary Our business operations are subject to numerous risks and uncertainties, including those outside of our control, that could cause our actual results to be harmed, including risks regarding the following: Operation Risks • Our business may not generate sufficient cash flows from operations or future borrowings may not be available in amounts sufficient to enable us to fund liquidity needs or capital expenditures. • Our revenue, earnings and profitability are affected by the length of our sales cycle, and a longer sales cycle could adversely affect our results of operations and financial condition. • If we do not meet our revenue forecasts, we may be unable to reduce our expenses in a timely fashion to avoid or minimize harm to our results of operations. • We traditionally have had substantial customer concentration, with a limited number of customers accounting for a substantial portion of our revenue. • We are subject to credit risk and other risks associated with our accounts receivable securitization facility. • Fluctuations in foreign currency exchange rates could result in foreign currency transaction losses, which could harm our operating results and financial condition. • We must recruit and retain our key management and other key personnel and our failure to recruit and retain qualified employees could have a negative impact on our business. • Many of our products are complex and may contain defects that are detected only after deployment. • Failure to maintain the confidentiality, integrity and availability of our systems, software and solutions could seriously damage our reputation and affect our ability to retain customers and attract new business. • The quality of our support and services offerings is important to our customers and if we fail to meet out service level obligations under our service level agreements or otherwise fail to offer quality support and services, we would be subject to penalties and could lose customers. • Our reliance on third-party providers for communications software, services, hardware and infrastructure exposes us to a variety of risks we cannot control. 11 Table of Contents • Downgrades in our credit ratings may increase our future borrowing costs, limit our ability to raise capital, cause our stock price to decline, any of which could have a material adverse impact on our business. • Our insurance policies, including general liability, errors and omissions and cyber insurance, may not totally protect us.
In that case, the trading price of our securities could decline, and our investors may lose part or all of their investment. 10 Table of Contents Risk Factors Summary Our business operations are subject to numerous risks and uncertainties, including those outside of our control, that could cause our actual results to be harmed, including risks regarding the following: Operation Risks • Our business may not generate sufficient cash flows from operations or future borrowings may not be available in amounts sufficient to enable us to fund liquidity needs or capital expenditures. • Our revenue, earnings and profitability are affected by the length of our sales cycle, and a longer sales cycle could adversely affect our results of operations and financial condition. • If we do not meet our revenue forecasts, we may be unable to reduce our expenses in a timely fashion to avoid or minimize harm to our results of operations. • We traditionally have had substantial customer concentration, with a limited number of customers accounting for a substantial portion of our revenue. • We must recruit and retain our key management and other key personnel and our failure to recruit and retain qualified employees could have a negative impact on our business. • Our products are complex and may contain defects that are detected only after deployment. • Failure to maintain the confidentiality, integrity and availability of our systems, software and solutions could seriously damage our reputation and affect our ability to retain customers and attract new business. • The quality of our support and services offerings is important to our customers and if we fail to meet out service level obligations under our service level agreements or otherwise fail to offer quality support and services, we would be subject to penalties and could lose customers. • Our reliance on third-party providers for communications software, services, hardware and infrastructure exposes us to a variety of risks we cannot control. • We are subject to credit risk and other risks associated with our accounts receivable securitization facility. • Fluctuations in foreign currency exchange rates could result in foreign currency transaction losses, which could harm our operating results and financial condition. • Downgrades in our credit ratings may increase our future borrowing costs, limit our ability to raise capital, cause our stock price to decline, any of which could have a material adverse impact on our business. • Our insurance policies, including general liability, errors and omissions and cyber insurance, may not totally protect us.
Additionally, the information provided by, or residing in, the software or services we provide to our customers could be deemed 29 Table of Contents relevant to a regulatory investigation or other governmental or private legal proceeding involving our customers, which could result in requests for information from us that could be expensive and time consuming for us to address or harm our reputation since our customers rely on us to protect the confidentiality of their information.
Additionally, the information provided by, or residing in, the software or services we provide to our customers could be deemed relevant to a regulatory investigation or other governmental or private legal proceeding involving our customers, which could result in requests for information from us that could be expensive and time consuming for us to address or harm our reputation since our customers rely on us to protect the confidentiality of their information.
Further instability or tension in the geopolitical climate could also cause us to adjust our operating model, which would increase our costs of operations. As we continue to expand our business globally, our success will depend, in large part, on our ability to anticipate and effectively manage these and other risks associated with our international operations.
Further instability or tension in the geopolitical climate could also cause us to adjust our operating model, which would increase our costs of operations. As we continue to expand our business globally, 28 Table of Contents our success will depend, in large part, on our ability to anticipate and effectively manage these and other risks associated with our international operations.
We rely on encryption and authentication technology licensed from third parties to effectively secure transmission of this information. We are, or may become subject to various federal, state, local and foreign laws, related regulations, and industry standards regarding privacy and the collection, processing, storage, sharing, disclosure, use or protection of personal information and other data.
We 29 Table of Contents rely on encryption and authentication technology licensed from third parties to effectively secure transmission of this information. We are, or may become subject to various federal, state, local and foreign laws, related regulations, and industry standards regarding privacy and the collection, processing, storage, sharing, disclosure, use or protection of personal information and other data.
Concerns over economic recession, the COVID-19 pandemic, interest rate increases and inflation, supply chain delays and disruptions, policy priorities of the U.S. presidential administration, trade wars, unemployment, or prolonged government shutdown may contribute to increased volatility and diminished expectations for the economy and markets. Additionally, concern over geopolitical issues may also contribute to prolonged market volatility and instability.
Concerns over economic recession, interest rate increases and inflation, supply chain delays and disruptions, policy priorities of the U.S. presidential administration, trade wars, unemployment, or prolonged government shutdown may contribute to increased volatility and diminished expectations for the economy and markets. Additionally, concern over geopolitical issues may also contribute to prolonged market volatility and instability.
There are several proposed changes to U.S. and non-U.S. tax legislation and the ultimate enactment of any of them could have a negative impact on our effective tax rate. It is possible that future requirements, including the recently proposed implementation of International Financial Reporting Standards (“IFRS”) could change our current application of U.S.
There are several proposed changes to U.S. and non-U.S. tax legislation and the ultimate enactment of any of them could have a negative impact on our effective tax rate. It is possible that 33 Table of Contents future requirements, including the recently proposed implementation of International Financial Reporting Standards (“IFRS”) could change our current application of U.S.
These provisions may place additional burden on our management to assess the impact of the rules and potentially create additional tax costs. EU countries 34 Table of Contents and other jurisdictions will continue to interpret or issue additional guidance on how provisions of the anti-hybrid will be applied, which, if applicable, may materially impact our financial statements and cash flow.
These provisions may place additional burden on our management to assess the impact of the rules and potentially create additional tax costs. EU countries and other jurisdictions will continue to interpret or issue additional guidance on how provisions of the anti-hybrid will be applied, which, if applicable, may materially impact our financial statements and cash flow.
Our future results could be materially adversely affected by a variety of political, economic or other factors relating to our operations inside and outside the United States, including impacts from global central bank monetary policy; issues related to the political relationship between the United States and other countries that can affect the willingness of customers in those countries to purchase products from companies headquartered in the United States; business interruptions resulting from regional or larger scale conflicts or geo-political actions; the impact of the COVID-19 or other public health epidemics or concerns on our customer’s component suppliers, and the challenging and inconsistent global macroeconomic environment, any or all of which could have a material adverse effect on our operating results and financial condition, including, among others things: • current or future supply chain interruptions; • foreign currency exchange rates; • political or social unrest or instability; • economic instability or weakness, including inflation, or natural disasters in a specific country or region, including the current economic or health challenges in China and global economic ramifications of Chinese economic difficulties; • environmental and trade protection measures and other legal and regulatory requirements, some of which may affect our ability to import our products, to export our products from, or sell our products in various countries; • political considerations that affect service provider and government spending patterns; • health or similar issues and the responses thereto, such as a pandemic or epidemic, including the COVID-19 pandemic and responses taken thereto; • natural disasters, terrorism, war or other military conflict, including effects of the ongoing conflict between Russia and Ukraine, and the possibility of a wider European or global conflict, and global sanctions imposed in response thereto, telecommunication and electrical failures; • difficulties in staffing and managing international operations; or • adverse tax consequences, including imposition of withholding or other taxes on our global operations.
Our future results could be materially adversely affected by a variety of political, economic or other factors relating to our operations inside and outside the United States, including impacts from global central bank monetary policy; issues related to the political relationship between the United States and other countries that can affect the willingness of customers in those countries to purchase products from companies headquartered in the United States; business interruptions resulting from regional or larger scale conflicts or geo-political actions; the impact of the COVID-19 or other public health epidemics or concerns on our customer’s component suppliers, and the challenging and inconsistent global macroeconomic environment, any or all of which could have a material adverse effect on our operating results and financial condition, including, among others things: • current or future supply chain interruptions; • foreign currency exchange rates; • political or social unrest or instability; • economic instability or weakness, including inflation, or natural disasters in a specific country or region; • environmental and trade protection measures and other legal and regulatory requirements, some of which may affect our ability to import our products, to export our products from, or sell our products in various countries; • political considerations that affect service provider and government spending patterns; • health or similar issues and the responses thereto, such as a pandemic or epidemic, including the COVID-19 pandemic and responses taken thereto; • natural disasters, terrorism, war or other military conflict, including effects of the ongoing conflict between Russia and Ukraine, the conflict between Israel and Hamas and other militant groups in the Middle East and the possibility of a wider regional or global conflict, and global sanctions imposed in response thereto, telecommunication and electrical failures; • difficulties in staffing and managing international operations; or • adverse tax consequences, including imposition of withholding or other taxes on our global operations.
We intend to continue to make investments to support our business growth, including expenditures to develop new services or enhance our existing services, enhance our operating infrastructure, market and sell our product offerings and acquire complementary businesses and technologies. These endeavors may involve significant risks and uncertainties and could lead to 17 Table of Contents a misapplication of our resources.
We intend to continue to make investments to support our business growth, including expenditures to develop new services or enhance our existing services, enhance our operating infrastructure, market and sell our product offerings and acquire complementary businesses and technologies. These endeavors may involve significant risks and uncertainties and could lead to a misapplication of our resources.
Any compromise or breach of our security measures, or those of our third-party service providers, may violate applicable privacy, data security and other laws, and cause significant legal and financial exposure, adverse publicity and a loss of confidence in our security measures, which could have a material adverse effect on our business, financial condition and results of operations.
Any compromise or breach of our 31 Table of Contents security measures, or those of our third-party service providers, may violate applicable privacy, data security and other laws, and cause significant legal and financial exposure, adverse publicity and a loss of confidence in our security measures, which could have a material adverse effect on our business, financial condition and results of operations.
Like all software solutions, our software is vulnerable to these types of attacks. An attack of this type could disrupt the proper functioning of our software solutions, cause errors in the output of our customers’ work, allow unauthorized access to sensitive, proprietary or confidential information of ours or our customers, and other destructive outcomes.
Like all software solutions, our software is vulnerable to these types of attacks. An attack of this type could disrupt the proper functioning of our software solutions, cause errors in the output of our customers’ work, allow unauthorized 16 Table of Contents access to sensitive, proprietary or confidential information of ours or our customers, and other destructive outcomes.
We could also lose future sales or customers may make claims against us, which could result in an increase in our provision for doubtful accounts, an increase in collection cycles for accounts receivable or the expense or risk of litigation. Additionally, third-party software underlying our services can contain undetected errors or bugs.
We could also lose future sales or customers may make claims against us, which could result in an increase in our provision for credit losses, an increase in collection cycles for accounts receivable or the expense or risk of litigation. Additionally, third-party software underlying our services can contain undetected errors or bugs.
The successful assertion of one or more large claims against us that exceeds our available insurance coverage, or the occurrence of changes in our insurance 23 Table of Contents policies, including premium increases or the imposition of large deductible or co-insurance requirements, could have a material adverse effect on our business, financial condition and results of operations.
The successful assertion of one or more large claims against us that exceeds our available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could have a material adverse effect on our business, financial condition and results of operations.
If we fail to achieve appropriate economics of scale or if we fail to manage or anticipate the evolution and demand of the SaaS pricing model, then our business and operating results could be adversely affected.
If we fail to achieve appropriate economies of scale or if we fail to manage or anticipate the evolution and demand of the SaaS pricing model, then our business and operating results could be adversely affected.
We will continue to assess the ongoing impact of these current and pending changes to global tax legislation and the impact on the Company's future financial statements upon the finalization of laws, regulations and additional guidance.
We will continue to assess the ongoing impact of these current and pending changes to global tax legislation and the impact on our future financial statements upon the finalization of laws, regulations and additional guidance.
Our estimates of sales trends may not 14 Table of Contents correlate with actual revenues in a particular quarter or over a longer period of time. Variations in the rate and timing of conversion of our sales prospects into sales and actual revenues could cause us to plan or budget inaccurately and those variations could adversely affect our financial results.
Our estimates of sales trends may not correlate with actual revenues in a particular quarter or over a longer period of time. Variations in the rate and timing of conversion of our sales prospects into sales and actual revenues could cause us to plan or budget inaccurately and those variations could adversely affect our financial results.
In addition, future debt and security agreements entered into by our subsidiaries may contain various 38 Table of Contents restrictions, including restrictions on payments by our subsidiaries to us and the transfer by our subsidiaries of assets pledged as collateral. The indenture under which the Senior Notes were issued contains limited protection for holders of the Senior Notes.
In addition, future debt and security agreements entered into by our subsidiaries may contain various restrictions, including restrictions on payments by our subsidiaries to us and the transfer by our subsidiaries of assets pledged as collateral. The indenture under which the Senior Notes were issued contains limited protection for holders of the Senior Notes.
The purchase of the types of products and services that we offer typically requires coordination and agreement across many departments within a potential customer’s 13 Table of Contents organization. Delays associated with such timing factors could have a material adverse effect on our results of operations and financial condition.
The purchase of the types of products and services that we offer typically requires coordination and agreement across many departments within a potential customer’s organization. Delays associated with such timing factors could have a material adverse effect on our results of operations and financial condition.
In 36 Table of Contents addition, the terms of our current credit agreement and any future indebtedness that we may incur could preclude us from paying dividends. As a result, capital appreciation, if any, of our common stock will be a shareholder’s sole source of gain for the foreseeable future.
In addition, the terms of our current credit agreement and any future indebtedness that we may incur could preclude us from paying dividends. As a result, capital appreciation, if any, of our common stock will be a shareholder’s sole source of gain for the foreseeable future.
We base our operating expense and capital investment budgets on expected sales and revenue trends, and many of our expenses, such as office and equipment leases and personnel costs, will be relatively fixed in the short term and will increase over time as we make investments in our business.
We base our operating expense and capital investment budgets on expected sales and revenue trends, and many of our expenses, such as office and equipment leases and personnel costs, will be relatively fixed 13 Table of Contents in the short term and will increase over time as we make investments in our business.
While a foreign 22 Table of Contents national who is working under an immigrant visa tied to his or her employment by us may be less likely to choose to leave our Company than a similarly situated employee who is a United States national or a green card holder (as leaving our employ could mean also having to leave the United States), this may not always be the case.
While a foreign national who is working under an immigrant visa tied to his or her employment by us may be less likely to choose to leave our Company than a similarly situated employee who is a United States national or a green card holder (as leaving our employ could mean also having to leave the United States), this may not always be the case.
Our success depends to a significant degree upon the protection of our software and other proprietary technology rights. We rely on trade secret, copyright and trademark laws and confidentiality agreements with employees and third parties, all of 30 Table of Contents which offer only limited protection.
Our success depends to a significant degree upon the protection of our software and other proprietary technology rights. We rely on trade secret, copyright and trademark laws and confidentiality agreements with employees and third parties, all of which offer only limited protection.
Consequences of these incidents can 32 Table of Contents include damage to our reputation, early termination of our contracts, loss of business, litigation, regulatory investigations and other liabilities. Even a perceived security incident could damage the market perception of our business and adversely impact our results of operations and financial condition.
Consequences of these incidents can include damage to our reputation, early termination of our contracts, loss of business, litigation, regulatory investigations and other liabilities. Even a perceived security incident could damage the market perception of our business and adversely impact our results of operations and financial condition.
In addition, problems with the third-party software underlying our services could result in: • damage to our reputation; • loss of or customers or delayed revenue; • warranty claims or litigation; 21 Table of Contents • loss of or delayed market acceptance of our services, or • unexpected expenses and diversion of resources to remedy errors.
In addition, problems with the third-party software underlying our services could result in: • damage to our reputation; • loss of or customers or delayed revenue; • warranty claims or litigation; • loss of or delayed market acceptance of our services, or • unexpected expenses and diversion of resources to remedy errors.
If the demand for connected devices were to slow down or decline or the supply of connected devices to our customers is impacted for any reason, such as COVID-19 or other public health epidemics or concerns, our business and results of operations may be adversely affected.
If the demand for connected devices were to slow down or decline or the supply of connected devices to our customers is impacted for any reason, such as public health epidemics or concerns, our business and results of operations may be adversely affected.
Due to the inherent uncertainty of litigation, we cannot predict the outcome of the litigation and can give no assurance that the asserted claims will not have a material adverse effect on its financial position, 37 Table of Contents prospects, or results of operations.
Due to the inherent uncertainty of litigation, we cannot predict the outcome of the litigation and can give no assurance that the asserted claims will not have a material adverse effect on its financial position, prospects, or results of operations.
The introduction of products or services and the emergence of new industry standards can render our existing services obsolete and unmarketable in short periods of time. We expect others to continue to develop 28 Table of Contents and introduce new and enhance existing products and services that will compete with our services.
The introduction of products or services and the emergence of new industry standards can render our existing services obsolete and unmarketable in short periods of time. We expect others to continue to develop and introduce new and enhance existing products and services that will compete with our services.
Any regulation imposing greater fees for Internet use or restricting the exchange of information over the Internet could result in reduced growth or a decline in the use of the Internet and could diminish the viability of our Internet-based services, which could harm our business and operating results.
Any regulation imposing greater fees for Internet use or restricting the exchange of information over the 27 Table of Contents Internet could result in reduced growth or a decline in the use of the Internet and could diminish the viability of our Internet-based services, which could harm our business and operating results.
Treasury Department and the IRS. The 1% excise tax may increase our costs and impact our operations. This could have an adverse effect on our margins and financial position and would negatively affect our revenues and results of operations and/or trading price of our common stock.
The 1% excise tax may increase our costs and impact our operations. This could have an adverse effect on our margins and financial position and would negatively affect our revenues and results of operations and/or trading price of our common stock.
If the Senior Notes are traded after their initial issuance, they may trade at a discount from their initial offering price depending on prevailing interest rates, the market for similar securities, our credit ratings, general economic conditions, our financial condition, 39 Table of Contents performance and prospects and other factors.
If the Senior Notes are traded after their initial issuance, they may trade at a discount from their initial offering price depending on prevailing interest rates, the market for similar securities, our credit ratings, general economic conditions, our financial condition, performance and prospects and other factors.
Moreover, businesses that are good credit risks at the time of application may become bad credit risks over time and we may fail to detect this change. We maintain reserves we believe are adequate to cover exposure for doubtful accounts.
Moreover, businesses that are good credit risks at the time of application may become bad credit risks over time and we may fail to detect this change. We maintain reserves we believe are adequate to cover exposure for credit losses.
Because subscription revenue related to our SaaS offerings is typically recognized ratably over time, we expect to experience near-term revenue growth as more customers move to our SaaS subscriptions. If the Company does not achieve near term growth, we may not be able to adjust our cost structure in response to changes in subscription agreements in a period.
Because subscription revenue related to our SaaS offerings is typically recognized ratably over time, we expect to experience near-term revenue growth as more customers move to our SaaS subscriptions. If we do not achieve near term growth, we may not be able to adjust our cost structure in response to changes in subscription agreements in a period.
We must adapt to these rapidly changing markets by continually improving the features, functionality, reliability and responsiveness of our products and services, and by developing new features, services and applications to meet changing customer needs and further address the markets we serve.
We must adapt to these rapidly changing markets by continually improving the features, functionality, reliability and responsiveness of our products 25 Table of Contents and services, and by developing new features, services and applications to meet changing customer needs and further address the markets we serve.
As of December 31, 2022 BRF owned 13.3% of our outstanding common stock and all of our Series B Preferred Stock. As a result, BRF holds significant influence over us as a significant shareholder and may have conflicts of interest that arise out of current or future contractual relationships it or its affiliates may have with us.
As of December 31, 2023 BRF owned 13.7% of our outstanding common stock and all of our Series B Preferred Stock. As a result, BRF holds significant influence over us as a significant shareholder and may have conflicts of interest that arise out of current or future contractual relationships it or its affiliates may have with us.
Our products are highly complex, and we cannot assure customers that our extensive product development, production and integration testing is, or will be, adequate to detect all defects, errors, failures and quality issues that could affect customer 18 Table of Contents satisfaction or result in claims against us.
Our products are highly complex, and we cannot assure customers that our extensive product development, production and integration testing is, or will be, adequate to detect all defects, errors, failures and quality issues that could affect customer satisfaction or result in claims against us.
Our competition may also independently develop technology equivalent to ours and our intellectual property rights may not be sufficient to prevent them from marketing and selling those products which incorporate such technology, which could have a material adverse effect on our ability to compete in the marketplace.
Our competition may also independently develop technology equivalent to ours and our intellectual property rights may not be sufficient to prevent them from marketing and 17 Table of Contents selling those products which incorporate such technology, which could have a material adverse effect on our ability to compete in the marketplace.
In addition, if the market for technology stocks or the stock market in general experiences uneven investor confidence, the market price of our common stock could decline for reasons unrelated to our business, operating results or financial condition.
In addition, if the market for technology stocks or the stock market in general experiences uneven investor confidence, the 34 Table of Contents market price of our common stock could decline for reasons unrelated to our business, operating results or financial condition.
We are subject to the credit risk of our customers, and customers with liquidity issues may lead to credit losses for us.
We are exposed to our customers’ credit risk. We are subject to the credit risk of our customers, and customers with liquidity issues may lead to credit losses for us.
While we make significant efforts to address any IT security issues with respect to our acquisitions, we may still inherit certain risks when we integrate these acquisitions. In addition, our business interruption insurance may be insufficient to compensate us 20 Table of Contents for losses or liabilities that may occur.
While we make significant efforts to address any IT security issues with respect to our acquisitions, we may still inherit certain risks when we integrate these acquisitions. In addition, our business interruption insurance may be insufficient to compensate us for losses or liabilities that may occur.
Additionally, we may be required to make publicly 33 Table of Contents available any source code for modifications or derivative works we create based upon, incorporating or using the open source software and/or license those modifications or alterations on terms that are unfavorable to us.
Additionally, we may be required to make publicly available any source code for modifications or derivative works we create based upon, incorporating or using the open source software and/or license those modifications or alterations on terms that are unfavorable to us.
Our customers’ businesses are relatively complex and their purchase of the types of products and services that we offer generally involve a significant financial commitment, with attendant delays, frequently associated with large financial commitments and procurement procedures within an organization.
Our customers’ businesses are relatively complex and their purchase of the types of products and services that we offer generally involve a significant financial commitment, with 12 Table of Contents attendant delays, frequently associated with large financial commitments and procurement procedures within a large organization.
In the event that there is substantial subscriber migration from our existing customers to service providers with which we do not have relationships, the fees that we receive on a per-subscriber basis, and the related revenue, including search and digital advertising revenue, could decline.
In the event that there is substantial subscriber migration from our existing customers to service providers with which we do not have relationships, the fees that we receive on a per-subscriber basis, and the related revenue could decline.
Although we have programs in place that are designed to monitor and mitigate the associated risk, including monitoring of particular risks in certain geographic areas, there can be no assurance , especially during the COVID-19 pandemic, that these programs will be effective in reducing our credit risks or preventing us from incurring additional losses.
Although we have programs in place that are designed to monitor and mitigate the associated risk, including monitoring of particular risks in certain geographic areas, there can be no assurance that these programs will be effective in reducing our credit risks or preventing us from incurring additional losses.
In addition, our subscription based offerings may be invoiced over multiple reporting periods, which could subject us to additional collection and credit risks, particularly if a customer does not plan to renew these subscriptions.
In addition, our subscription based offerings may be invoiced over multiple reporting periods, which could subject us to additional collection 24 Table of Contents and credit risks, particularly if a customer does not plan to renew these subscriptions.
Continued uncertainty about the pandemic, associated economic consequences, and potential relief measures may have a long-term adverse effect on the economy, our sellers, customers, suppliers, and our business. For example, we are currently subletting some of our office space.
Continued uncertainty about the associated economic consequences may have a long-term adverse effect on the economy, our sellers, customers, suppliers, and our business. For example, we are currently subletting some of our office space.
Most of our sales are on an open credit basis, with typical payment terms between 45 and 60 days in the United States and, because of local customs or conditions, longer payment terms in some markets outside the United States.
Most of our sales are on an open credit basis, with typical payment terms 90 days in the United States and, because of local customs or conditions, longer payment terms in some markets outside the United States.
We may not be able to timely adapt to these challenges or respond 26 Table of Contents successfully or in a cost-effective way and we will not have the resources to invest in all existing and potential technologies.
We may not be able to timely adapt to these challenges or respond successfully or in a cost-effective way and we will not have the resources to invest in all existing and potential technologies.
While the Company does not currently have operations in areas experiencing rising political conflict and uncertainty, there is an increased likelihood that escalation of tensions could result in cyber-attacks or cybersecurity incidents that could either directly or indirectly impact our operations.
While we do not currently have operations in areas experiencing rising political conflict and uncertainty, there is an increased likelihood that escalation of tensions could result in cyber-attacks or cybersecurity incidents that could either directly or indirectly impact our operations.
Further, we may conclude based on our own review that our services may be subject to sales and use taxes in other areas where we do business. Under these circumstances, we may voluntarily disclose our estimated liability to the respective tax authorities and initiate activities to collect taxes going forward.
Further, we may conclude based on our own review that our previous services may be subject to sales and use taxes in other areas where we previously did business. Under these circumstances, we may voluntarily disclose our estimated liability to the respective tax authorities and initiate activities to collect taxes.
Our cloud strategy will continue to evolve, and we may not be able to compete effectively, generate significant revenues or maintain profitability.
Our cloud strategy will 23 Table of Contents continue to evolve, and we may not be able to compete effectively, generate significant revenues or maintain profitability.
Our business could be affected by acts of war or other military actions, terrorism, natural disasters and the widespread outbreak of infectious diseases. Current world tensions could escalate, and this could have unpredictable consequences on the world economy and on our business. The COVID-19 pandemic has created significant uncertainty in the global economy.
Our business could be affected by acts of war or other military actions, terrorism, natural disasters and the widespread outbreak of infectious diseases. Current world tensions could escalate, and this could have unpredictable consequences on the world economy and on our business. There is significant uncertainty in the global economy.
Moreover, these rules and regulations increase our legal and financial compliance costs and make some activities more time-consuming and costlier.
Moreover, these rules and 32 Table of Contents regulations increase our legal and financial compliance costs and make some activities more time-consuming and costlier.
Pursuant to the Series B Certificate, we will be required to use (i) the first $50.0 million of proceeds from certain transactions (i.e., disposition, sale of assets, tax refunds) received by the Company to redeem for cash, shares of the Series B Preferred Stock, on a pro rata basis among each holder of Series B Preferred Stock and (ii) the next $25.0 million of proceeds from certain transactions received by us may be used by us to buy back shares of common stock and to the extent, not used for such purpose, to redeem, for cash, shares of the Series B Preferred Stock, on a pro rata basis among each holder of the Series B Preferred Stock. 40 Table of Contents We expect that each redemption of Series B Preferred Stock after December 31, 2022 will be subject to the 1% excise tax.
Pursuant to the Series B Certificate, we will be required to use (i) the first $50.0 million of proceeds from certain transactions (i.e., disposition, sale of assets, tax refunds) received by the Company to redeem for cash, shares of the Series B Preferred Stock, on a pro rata basis among each holder of Series B Preferred Stock and (ii) the next $25.0 million of proceeds from certain transactions received by us may be used by us to buy back shares of common stock and to the extent, not used for such purpose, to redeem, for cash, shares of the Series B Preferred Stock, on a pro rata basis among each holder of the Series B Preferred Stock.
We compete with independent providers of information systems and services and with the in-house departments of our OEMs and communications services companies’ customers.
We compete with independent providers of cloud solutions and services and with the in-house departments of our OEMs and communications services companies’ customers.
Other than the payment of dividends, either in-kind or in cash, on our previous Series A Preferred Stock and our current Series B Preferred Stock in accordance with the Series B Certificate, we have not paid dividends on any of our classes of capital stock and we currently intend to retain our future earnings, if any, to fund the development and growth of our business.
Other than the payment of dividends, either in-kind or in cash, on our Preferred Stock, we have not paid dividends on any of our classes of capital stock and we currently intend to retain our future earnings, if any, to fund the development and growth of our business.
In addition, as we continue to further penetrate the enterprise, and the size and complexity of our sales opportunities continue to expand, we have seen an increase in the average length of time in our sales cycles.
In addition, as we continue to further expand our presence in the global market, and the size and complexity of our sales opportunities continue to vary, we have seen an increase in the average length of time in our sales cycles.
Incurrence of additional debt would also further reduce the cash available to invest in operations, as a result of increased debt service obligations. If new debt is added to our current debt levels, the related risks that we now face could intensify.
This may have the effect of reducing the amount of proceeds paid to investors. Incurrence of additional debt would also further reduce the cash available to invest in operations, as a result of increased debt service obligations. If new debt is added to our current debt levels, the related risks that we now face could intensify.
Of these customers, Verizon accounted for more than 10% of our revenues in 2022, 2021, and 2020. There are inherent risks whenever a large percentage of total revenues are concentrated with a limited number of customers.
Of these customers, Verizon accounted for more than 10% of the Company’s revenues in 2023, 2022, and 2021; and AT&T accounted for more than 10% of the Company’s revenues in 2023. There are inherent risks whenever a large percentage of total revenues are concentrated with a limited number of customers.
In particular, the terms of the indenture and the Senior Notes do not place any restrictions on our or our subsidiaries’ ability to: • issue debt securities or otherwise incur additional indebtedness or other obligations, including (1) any indebtedness or other obligations that would be equal in right of payment to the Senior Notes, (2) any indebtedness or other obligations that would be secured and therefore rank effectively senior in right of payment to the Senior Notes to the extent of the values of the assets securing such debt, (3) indebtedness of ours that is guaranteed by one or more of our subsidiaries and which therefore is structurally senior to the Senior Notes and (4) securities, indebtedness or obligations issued or incurred by our subsidiaries that would be senior to our equity interests in our subsidiaries and therefore rank structurally senior to the Senior Notes with respect to the assets of our subsidiaries; • pay dividends on, or purchase or redeem or make any payments in respect of, capital stock or other securities subordinated in right of payment to the Senior Notes; • sell assets (other than certain limited restrictions on our ability to consolidate, merge or sell all or substantially all of our assets); • enter into transactions with affiliates; • create liens (including liens on the shares of our subsidiaries) or enter into sale and leaseback transactions; • make investments; or • create restrictions on the payment of dividends or other amounts to us from our subsidiaries.
In particular, the terms of the indenture and the Senior Notes do not place any restrictions on our or our subsidiaries’ ability to: • issue debt securities or otherwise incur additional indebtedness or other obligations, including (1) any indebtedness or other obligations that would be equal in right of payment to the Senior Notes, (2) any indebtedness or other obligations that would be secured and therefore rank effectively senior in right of payment to the Senior Notes to the extent of the values of the assets securing such debt, (3) indebtedness of ours that is guaranteed by one or more of our subsidiaries and which therefore is structurally senior to the Senior Notes and (4) securities, indebtedness or obligations issued or incurred by our subsidiaries that would be senior to our equity interests in our subsidiaries and therefore rank structurally senior to the Senior Notes with respect to the assets of our subsidiaries; • pay dividends on, or purchase or redeem or make any payments in respect of, capital stock or other securities subordinated in right of payment to the Senior Notes; • sell assets (other than certain limited restrictions on our ability to consolidate, merge or sell all or substantially all of our assets); • enter into transactions with affiliates; • create liens (including liens on the shares of our subsidiaries) or enter into sale and leaseback transactions; • make investments; or • create restrictions on the payment of dividends or other amounts to us from our subsidiaries. 37 Table of Contents In addition, the indenture does not include any protection against certain events, such as a change of control, a leveraged recapitalization or “going private” transaction (which may result in a significant increase of our indebtedness levels), restructuring or similar transactions.
If we are unable to manage 25 Table of Contents our SaaS pricing model in light of the foregoing risks and uncertainties, our business, results of operations and financial condition would be negatively impacted. Our business depends substantially on customers renewing and expanding their subscriptions for our services.
If we are unable to manage our SaaS pricing model in light of the foregoing risks and uncertainties, our business, results of operations and financial condition would be negatively impacted. Our business depends substantially on customers renewing and expanding their subscriptions for our services. Any decline in our customer renewals and expansions would harm our future operating results.
Rising tensions in the geopolitical climate, including effects of the ongoing conflict between Russia and Ukraine, and the possibility of a wider European or global conflict, and global sanctions imposed in response thereto, have created significant uncertainty in the global economy.
Rising tensions in the geopolitical climate, including effects of the ongoing conflict between Russia and Ukraine, and the conflict between Israel and Hamas and other militant groups in the Middle East and the possibility of a wider regional or global conflict, and global sanctions imposed in response thereto, have created significant uncertainty in the global economy.
Any decline in our customer renewal and expansions would harm our operating results. • The markets in which we market and sell our products and services are highly competitive, and if we do not adapt to rapid technological change, we could lose customers or market share, which could adversely affect our ability to sustain or grow revenue. • Consolidation in the telecommunications, media, technology industry and other industries that we serve can reduce the number of actual and potential customers and adversely affect our business. • If we do not maintain the compatibility of our services with third-party applications that our customers use in their business processes or if we fail to adapt our services to changes in technology or the marketplace, demand for our services could decline.
Any decline in our customer renewal and expansions would harm our operating results. • The markets in which we market and sell our products and services are highly competitive, and if we do not adapt to rapid technological change, our ability to sustain or grow revenue could be adversely affected. • Consolidation in the telecommunications, media, technology industry and other industries that we serve can reduce the number of actual and potential customers and adversely affect our business.
Our success depends on software, equipment, network connectivity and infrastructure hosting services supplied by, or leased from, our vendors and customers. In addition, we rely on third-party vendors to perform a substantial portion of our exception handling services.
Our reliance on third-party providers for communications software, services, hardware and infrastructure exposes us to a variety of risks we cannot control. Our success depends on software, equipment, network connectivity and infrastructure hosting services supplied by, or leased from, our vendors and customers. In addition, we rely on third-party vendors to perform a substantial portion of our exception handling services.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 2. PROPERTIES We lease approximately 120,000 square feet of office space for our corporate headquarters in Bridgewater, New Jersey. We have other leases in certain countries including Australia, India, Japan, Ireland, Italy and in various states in the United States including Arizona and Pennsylvania. The lease terms for our locations expire in the years between 2023 and 2028.
Biggest changeITEM 2. PROPERTIES We lease approximately 120,000 square feet of office space for our corporate headquarters in Bridgewater, New Jersey. We have other leases in certain countries including India, Ireland, and in various states in the United States including Arizona and Pennsylvania. The lease terms for our locations expire in the years between 2024 and 2028.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCEEDINGS For a discussion of our material pending legal proceedings that could impact our results of operations, financial condition or cash flows see Note 20. Legal Matters included in Part II, Item 8. “Notes to Consolidated Financial Statements” of this Annual Report on Form 10-K.
Biggest changeITEM 3. LEGAL PROCEEDINGS For a discussion of our material pending legal proceedings that could impact our results of operations, financial condition or cash flows see Note 22. Legal Matters of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe Company paid the following Series B preferred dividends and principal during the year ended December 31, 2022 and accrued the following preferred dividends as of December 31, 2022: • First quarter: paid $1.8 million preferred dividends in the form of cash. • Second quarter: • paid $2.4 million preferred dividends in the form of Series B preferred shares (paid-in-kind); • made a $2.5 million principal and interest payment to redeem 2,438 shares of Series B Preferred stock; • made a $4.4 million principal and interest payment to redeem 4,300 shares of Series B Preferred stock. • Third quarter: paid $2.3 million preferred dividends in the form of cash. 42 Table of Contents • Fourth quarter: • paid $2.3 million preferred dividends in the form of cash; • accrued $2.3 million preferred dividends which was paid in the form of cash on January 3, 2023.
Biggest changeThe Company paid the following Series B preferred dividends and principal during the year ended December 31, 2023 and accrued the following preferred dividends as of December 31, 2023: • paid $9.8 million preferred dividends in cash; • made a $9.9 million principal payment to redeem 9,874 shares of Series B Preferred stock; • accrued $2.3 million preferred dividend which was paid in cash on January 3, 2023.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information As of December 31, 2022, our common stock was traded and listed on The Nasdaq Global Select Market under the symbol “SNCR.” As of December 31, 2022, there were approximately 52 named holders of record of our common stock as according to our transfer agent.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information As of December 31, 2023, our common stock was traded and listed on The Nasdaq Global Select Market under the symbol “SNCR.” As of December 31, 2023, there were approximately 52 named holders of record of our common stock as according to our transfer agent.
Under the Series A Certificate, the holders of the Series A Preferred Stock were entitled to receive, on each share of Series A Preferred Stock on a quarterly basis, an amount equal to the dividend rate of 14.5% divided by four and multiplied by the then-applicable Liquidation Preference (as defined in the Series A Certificate) per share of Series A Preferred Stock (collectively, the “Preferred Dividends”).
Under the Series A 43 Table of Contents Certificate, the holders of the Series A Preferred Stock were entitled to receive, on each share of Series A Preferred Stock on a quarterly basis, an amount equal to the dividend rate of 14.5% divided by four and multiplied by the then-applicable Liquidation Preference (as defined in the Series A Certificate) per share of Series A Preferred Stock (collectively, the “Preferred Dividends”).
Information concerning securities authorized for issuance under equity compensation plans is set forth under the heading “Securities Authorized for Issuance Under Equity Compensation Plans” in the Synchronoss Proxy Statement for the 2022 Annual Meeting of Stockholders and is incorporated herein by reference. 43 Table of Contents Stock Performance Graph The graph set forth below compares the cumulative total stockholder return on our common stock between December 31, 2017 and December 31, 2022, with the cumulative total return of (i) the Nasdaq Computer Index and (ii) the Nasdaq Composite Index, over the same period.
Information concerning securities authorized for issuance under equity compensation plans is set forth under the heading “Securities Authorized for Issuance Under Equity Compensation Plans” in the Synchronoss Proxy Statement for the 2022 Annual Meeting of Stockholders and is incorporated herein by reference. 44 Table of Contents Stock Performance Graph The graph set forth below compares the cumulative total stockholder return on our common stock between December 31, 2018 and December 31, 2023, with the cumulative total return of (i) the Nasdaq Computer Index and (ii) the Nasdaq Composite Index, over the same period.
In the event the Company does not declare and pay a dividend in cash on any Series B Dividend Payment Date, the unpaid amount of the Preferred Dividend will be added to the Liquidation Preference. As of December 31, 2022, the Liquidation Value and Redemption Value of the Series B Preferred Shares was $73.0 million.
In the event the Company does not declare and pay a dividend in cash on any Series B Dividend Payment Date, the unpaid amount of the Preferred Dividend will be added to the Liquidation Preference. As of December 31, 2023, the Liquidation Value and Redemption Value of the Series B Preferred Shares was $63.0 million.
The actual number of stockholders is greater than this number of record holders, and includes stockholders who are beneficial owners, but whose shares are held in street name by banks, brokers and other nominees. On December 31, 2022, the last reported sale price of our common stock as reported on The Nasdaq Global Select Market was $0.62 per share.
The actual number of stockholders is greater than this number of record holders, and includes stockholders who are beneficial owners, but whose shares are held in street name by banks, brokers and other nominees. On December 31, 2023, the last reported sale price of our common stock as reported on The Nasdaq Global Select Market was $6.21 per share.
This graph assumes the investment of $100 on December 31, 2017 in our common stock, the Nasdaq Computer Index and the Nasdaq Composite Index, and assumes the reinvestment of dividends, if any. The graph assumes the initial value of our common stock on December 31, 2017 was the closing sales price of $8.94 per share.
This graph assumes the investment of $100 on December 31, 2018 in our common stock, the Nasdaq Computer Index and the Nasdaq Composite Index, and assumes the reinvestment of dividends, if any. The graph assumes the initial value of our common stock on December 31, 2018 was the closing sales price of $55.26 per share.
No Series A Preferred Stock remains outstanding or authorized as of December 31, 2022. For a discussion of our stockholder’s equity refer to Note 13. Capital Structure included in Part II, Item 8. “Notes to Consolidated Financial Statements” of this Annual Report on Form 10-K.
No Series A Preferred Stock remains outstanding or authorized as of December 31, 2023. For a discussion of our stockholder’s equity refer to Note 15. Capital Structure of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K.
December 31, 2017 December 31, 2018 December 31, 2019 December 31, 2020 December 31, 2021 December 31, 2022 Synchronoss Technologies, Inc. $100 $69 $53 $53 $27 $7 Nasdaq Composite Index $100 $96 $130 $187 $227 $152 Nasdaq Computer Index $100 $96 $145 $217 $299 $192 44 Table of Contents
December 31, 2018 December 31, 2019 December 31, 2020 December 31, 2021 December 31, 2022 December 31, 2023 Synchronoss Technologies, Inc. $100 $77 $77 $40 $10 $11 Nasdaq Composite Index $100 $135 $194 $236 $158 $226 Nasdaq Computer Index $100 $150 $225 $311 $200 $332 45 Table of Contents

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe approaches incorporate a number of market participant assumptions including future growth rates, discount rates, income tax rates and market activity in assessing fair value and are reporting unit specific. If the carrying amount exceeds the reporting unit's fair value, we recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value.
Biggest changeIf the carrying amount exceeds the reporting unit's fair value, we recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value. We recognize any impairment loss in operating income. 2023 Goodwill Impairment Analysis For our 2023 impairment tests, the Company identified one reporting unit, Core.
Redemption of Series A Preferred Stock The net proceeds from the common stock public offering, Senior Note offering and the Series B Transaction were used in part to fully redeem all outstanding shares of the Company’s Series A Preferred Stock on June 30, 2021 (the “Redemption”).
Redemption of Series A Preferred Stock The net proceeds from the common stock public offering, Senior Note offering and the Series B Preferred Stock Transaction were used in part to fully redeem all outstanding shares of the Company’s Series A Preferred Stock on June 30, 2021 (the “Redemption”).
The Company shall be required to obtain the prior written consent of the holders holding at least a majority of the outstanding shares of the Series B Preferred Stock before taking certain actions, including: (i) certain dividends, repayments and redemptions; (ii) any amendment to the Company’s certificate of incorporation that adversely affects the rights, preferences, privileges or voting powers of the Series B Preferred Stock; and (iii) issuances of stock ranking senior or equivalent to shares of the Series B Preferred Stock (including additional shares of the Series B Preferred Stock) in the priority of payment of dividends or in the distribution of assets upon any liquidation, dissolution or winding up of the Company.
The Company is required to obtain the prior written consent of the holders holding at least a majority of the outstanding shares of the Series B Preferred Stock before taking certain actions, including: (i) certain dividends, repayments and redemptions; (ii) any amendment to the Company’s certificate of incorporation that adversely affects the rights, preferences, privileges or voting powers of the Series B Preferred Stock; and (iii) issuances of stock ranking senior or equivalent to shares of the Series B Preferred Stock (including additional shares of the Series B Preferred Stock) in the priority of payment of dividends or in the distribution of assets upon any liquidation, dissolution or winding up of the Company.
Discussions of 2020 items and year-to-year comparisons between 2021 and 2020 are not included in this Form 10-K, and can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
Discussions of 2022 items and year-to-year comparisons between 2022 and 2021 are not included in this Form 10-K, and can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
Off-Balance Sheet Arrangements We had no off-balance sheet arrangements as of December 31, 2022 and December 31, 2021 that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
Off-Balance Sheet Arrangements We had no off-balance sheet arrangements as of December 31, 2023 and December 31, 2022 that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
Effect of Inflation Inflationary increases in certain input costs, such as occupancy, labor and benefits, and general administrative costs, have impacted our business. Management does not believe these impacts have had a material impact on our results of operations during the 2022, 2021 and 2020.
Effect of Inflation Inflationary increases in certain input costs, such as occupancy, labor and benefits, and general administrative costs, have impacted our business. Management does not believe these impacts have had a material impact on our results of operations during the 2023, 2022 and 2021.
On and after any redemption date, interest will cease to accrue on the redeemed Senior Notes. 47 Table of Contents On October 25, 2021, the Company entered into an At Market Issuance Sales Agreement (the “Sales Agreement”) between the Company and B. Riley Securities, Inc.
On and after any redemption date, interest will cease to accrue on the redeemed Senior Notes. 48 Table of Contents On October 25, 2021, the Company entered into an At Market Issuance Sales Agreement (the “Sales Agreement”) between the Company and B. Riley Securities, Inc.
Setup fees for transactional service arrangements are deferred until set up activities are completed and recognized on a straight‑line 51 Table of Contents basis over remaining expected customer relationship period. Revenues are presented net of discounts, which are volume level driven.
Setup 52 Table of Contents fees for transactional service arrangements are deferred until set up activities are completed and recognized on a straight‑line basis over remaining expected customer relationship period. Revenues are presented net of discounts, which are volume level driven.
It is also possible that changes in facts and circumstances could cause us to either materially increase or reduce the carrying amount of our tax reserves. In general, tax returns for the year 2018 and thereafter are subject to future examination by tax authorities.
It is also possible that changes in facts and circumstances could cause us to either materially increase or reduce the carrying amount of our tax reserves. In general, tax returns for the year 2020 and thereafter are subject to future examination by tax authorities.
Unrecoverable costs are reviewed annually and recognized in the period they become unrecoverable, as needed, and are recorded in the Consolidated Statements of Operations as depreciation and amortization expense. 54 Table of Contents Recently Issued Accounting Standards For a discussion of recently issued accounting standards see Note 2.
Unrecoverable costs are reviewed annually and recognized in the period they become unrecoverable, as needed, and are recorded in the Consolidated Statements of Operations as depreciation and amortization expense. 55 Table of Contents Recently Issued Accounting Standards For a discussion of recently issued accounting standards see Note 2.
Most of our revenues are recorded in U.S. dollars but as we continue to expand our footprint with international carriers, we will become subject to currency translation that could affect our future net sales as reported in U.S. dollars.
Most of our revenues are recorded in U.S. dollars but as we continue to expand our footprint with international carriers, we are subject to currency translation that could affect our future net sales as reported in U.S. dollars.
The MD&A should be read in conjunction with the Financial Statements and Notes to the consolidated financial statements. This section of this Form 10-K generally discusses 2022 and 2021 items and year-to-year comparisons between 2022 and 2021.
The MD&A should be read in conjunction with the Financial Statements and Notes to the consolidated financial statements. This section of this Form 10-K generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022.
Series A Convertible Preferred Stock In accordance with the terms of the Share Purchase Agreement dated as of October 17, 2017 (the “PIPE Purchase Agreement”), with Silver Private Holdings I, LLC, an affiliate of Siris (“Silver”), on February 15, 2018, the Company issued to Silver 185,000 shares of its newly issued Series A Convertible Participating Perpetual Preferred Stock (the “Series A Preferred Stock”), par value $0.0001 per share, with an initial liquidation preference of $1,000 per share, in exchange for $97.7 million in cash and the transfer from Silver to the Company of the 5,994,667 shares of the Company’s common stock held by Silver (the “Preferred Transaction”).
Series A Convertible Preferred Stock In accordance with the terms of the Share Purchase Agreement dated as of October 17, 2017 (the “PIPE Purchase Agreement”), with Silver Private Holdings I, LLC, an affiliate of Siris (“Silver”), on February 15, 2018, the Company issued to Silver 185,000 shares of its newly issued Series A Convertible Participating Perpetual Preferred Stock (the “Series A Preferred Stock”), par value $0.0001 per share, with an initial liquidation preference of $1,000 per share, in exchange for $97.7 million in cash and the transfer from Silver to the Company of the 666,075 shares of the Company’s common stock held by Silver (the “Preferred Transaction”).
As such, the volume of transactions and our ability to expand our footprint in TMT and globally may result in revenue fluctuations on a quarterly basis.
As such, the volume of subscribers and our ability to expand our footprint in TMT and globally may result in revenue fluctuations on a quarterly basis.
The Senior Notes and initial Senior Notes are listed and trade on The Nasdaq Global Market under the symbol “SNCRL.” The total fair value of the outstanding Senior Notes was $101.3 million as of December 31, 2022 . T he Company is in compliance with its debt covenants as of December 31, 2022. For further details, see Note 11.
The Senior Notes and initial Senior Notes are listed and trade on The Nasdaq Global Market under the symbol “SNCRL.” The total fair value of the outstanding Senior Notes was $101.3 million as of December 31, 2023 . T he Company is in compliance with its debt covenants as of December 31, 2023. For further details, see Note 13.
In the event the Company does not declare and pay a dividend in cash on any Series B Dividend Payment Date, the unpaid amount of the Preferred Dividend will be added to the Liquidation Preference. As of December 31, 2022, the Liquidation Value and Redemption Value of the Series B Preferred Shares was $73.0 million.
In the event the Company does not declare and pay a dividend in cash on any Series B Dividend Payment Date, the unpaid amount of the Preferred Dividend will be added to the Liquidation Preference. As of December 31, 2023, the Liquidation Value and Redemption Value of the Series B Preferred Shares was $63.0 million.
We believe the following to be our critical accounting policies because they are important to the portrayal of our consolidated financial condition and results of operations and they require critical management judgments and estimates about matters that are uncertain. Significant accounting policies that we employ are presented in the Notes to our Consolidated Financial Statements in Item 8 Note 2.
We believe the following to be our critical accounting policies because they are important to the portrayal of our consolidated financial condition and results of operations and they require critical management judgments and estimates about matters that are uncertain. Significant accounting policies that we employ are presented in Note 2.
When the Company does not allocate variable consideration to distinct periods of service, the total estimated transaction price is recognized ratably over the term of the contract, where the level of service provided to the customer does not vary significantly from one period to another.
When the Company does not allocate variable consideration to distinct periods of service or apply the variable consideration allocation exception, the total estimated transaction price is recognized ratably over the term of the contract, where the level of service provided to the customer does not vary significantly from one period to another.
Each share of Series B Preferred Stock will also be redeemable at the option of the holder upon the occurrence of a “Fundamental Change” at (i) par in the case of a payment in cash or (ii) 1.5 times par in the case of payment in shares of Common Stock (such shares being, “Registrable Securities”), subject to certain limitations on the amount of stock that could be issued to the holders of Series B Stock.
Each share of Series B Preferred Stock is redeemable at the option of the holder upon the occurrence of a “Fundamental Change” at (i) par in the case of a payment in cash or (ii) 1.5 times par in the case of payment in shares of Common Stock (such 49 Table of Contents shares being, “Registrable Securities”), subject to certain limitations on the amount of stock that could be issued to the holders of Series B Stock.
The following table summarizes our long‑term contractual obligations as of December 31, 2022 (in thousands).
The following table summarizes our long‑term contractual obligations as of December 31, 2023 (in thousands).
Cash flows from operating activities for the year ended December 31, 2022 was $17.4 million of cash provided by operating activities, as compared to $4.9 million of cash provided by operating activities for the same period in 2021 .
Cash flows from operating activities for the year ended December 31, 2023 was $18.8 million of cash provided by operating activities, as compared to $17.4 million of cash provided by operating activities for the same period in 2022 .
Factors specific to each reporting unit include revenue and cost growth, profit margins, terminal value growth rates, capital expenditures projections, assumed tax rates, discount rates and other assumptions deemed reasonable by management. Management also applied the market approach to the analysis. For the market approach, we used judgment in identifying the relevant comparable-company market multiples.
Factors specific to the reporting unit include revenue 54 Table of Contents and cost growth, profit margins, terminal value growth rates, capital expenditures projections, assumed tax rates, discount rates and other assumptions deemed reasonable by management. For the market approach, we used judgment in identifying the relevant comparable-company market multiples.
Cash flows from financing activities for the year ended December 31, 2022 was $13.3 million of cash used by financing activities, as compared to $16.2 million of cash provided for the same period in 2021, primarily due to principal and interest payments associated with the redemption of Series B Preferred Stock in 2022.
Cash flows from financing activities for the year ended December 31, 2023 was $20.0 million of cash used by financing activities, as compared to $13.3 million of cash used for the same period in 2022, primarily due to principal and dividend payments associated with the redemption of Series B Preferred Stock in 2023.
Cash flows from investing activities for the year ended December 31, 2022 was $13.2 million of cash used by investing activities, as compared to $23.9 million in cash used by investing activities during the same period in 2021 .
Cash flows from investing activities for the year ended December 31, 2023 was $3.8 million of cash provided by investing activities, as compared to $13.2 million in cash used by investing activities during the same period in 2022 .
The effective tax rate was approximately (31.7)% for the year ended December 31, 2022, which was lower than the U.S. federal statutory rate primarily 46 Table of Contents due to the impact of Global Intangible Low-Taxed Income, attributable to income in foreign jurisdictions and the impact of the U.S. capitalization of research expenses effective January 1, 2022, and the divestiture of the DXP and Activation assets during the second quarter.
The Company’s effective tax rate was approximately 0.9% for the year ended December 31, 2022, which was lower than the U.S. federal statutory rate primarily due to the impact of Global Intangible Low-Taxed Income, attributable to income in foreign jurisdictions and the impact of the U.S. capitalization of research expenses, and the divestiture of the DXP and Activation assets.
The Company generates all of its revenue from contracts with customers. Subscription and Transaction revenues consist of revenues derived from the processing of transactions through the Company’s service platforms, providing enterprise portal management services on a subscription basis and maintenance agreements on software licenses.
Subscription and Transaction revenues consist of revenues derived from the processing of transactions through the Company’s service platforms, providing enterprise portal management services on a subscription basis and maintenance agreements on software licenses.
Goodwill represents the excess of the purchase price over the fair value of assets acquired, including other definite-life intangible assets. Our policy is to perform an impairment test of goodwill at least annually, and more frequently if events or circumstances occurred that would indicate a reduced fair value in our reporting units could exist.
Our policy is to perform an impairment test of goodwill at least annually, and more frequently if events or circumstances occurred that would indicate a reduced fair value in our reporting units could exist.
Our liquidity plans are subject to a number of risks and uncertainties, including those described in the "Forward-Looking Statements" section of this MD&A and Part I, Item 1A. “Risk Factors”, some of which are outside of our control.
However, as the current geopolitical tensions unfold, we will continue to assess any impact on our operations and our liquidity needs. Our liquidity plans are subject to a number of risks and uncertainties, including those described in the "Forward-Looking Statements" section of this MD&A and Part I, Item 1A. “Risk Factors”, some of which are outside of our control.
Net revenues decreased $28.0 million to $252.6 million for the year ended December 31, 2022, compared to the same period in 2021.
Net revenues decreased $9.6 million to $164.2 million for the year ended December 31, 2023, compared to the same period in 2022.
These estimates and assumptions may vary between each reporting unit depending on the facts and circumstances specific to that unit. If sufficient comparable data is not present, the market approach will not be employed. The discount rate for each reporting unit is influenced by general market conditions as well as factors specific to the reporting unit.
If sufficient comparable data is not present, the market approach will not be employed. The discount rate for the reporting unit is influenced by general market conditions as well as factors specific to the reporting unit.
Current Trends Affecting Our Results of Operations Business from our Synchronoss Personal Cloud™ solution has been driven by the growth in mobile devices globally that are becoming content rich.
Divestitures and Discontinued Operations of the Notes to Consolidated Financial Statements in Item 8 of this Form 10-K. Current Trends Affecting Our Results of Operations Business from our Synchronoss Personal Cloud™ solution has been driven by the growth in mobile devices globally that are becoming content rich.
The Company’s top five customers accounted for 73.4%, 68.2% and 68.0% of net revenues for the years ended December 31, 2022, 2021 and 2020, respectively. Contracts with these cust omers typically run for three to five years. Of these customers, Verizon accounted for more than 10% of the Company’s revenues in 2022, 2021, and 2020.
The Company’s top five customers accounted for 96.6%, 94.6% and 92.4% of net revenues for the years ended December 31, 2023, 2022 and 2021, respectively. Contracts with these cust omers typically run for three to five years.
No Series A Preferred Stock remains outstanding or authorized as of December 31, 2022. 49 Table of Contents Discussion of Cash Flows A summary of net cash flows follows (in thousands): Twelve Months Ended December 31, Change 2022 2021 2022 vs 2021 Net cash provided by (used in): Operating activities $ 17,359 $ 4,945 $ 12,414 Investing activities $ (13,166) $ (23,943) $ 10,777 Financing activities $ (13,276) $ 16,188 $ (29,464) Our primary source of cash is receipts from revenue.
No Series A Preferred Stock remains outstanding or authorized as of December 31, 2023. 50 Table of Contents Discussion of Cash Flows A summary of net cash flows follows (in thousands): Year Ended December 31, Change 2023 2022 2023 vs 2022 Net cash provided by (used in): Operating activities $ 18,829 $ 17,359 $ 1,470 Investing activities $ 3,800 $ (13,166) $ 16,966 Financing activities $ (19,979) $ (13,276) $ (6,703) Our primary source of cash is receipts from revenue.
This decrease was partially offset by loss jurisdictions where full valuation allowances have been recorded and foreign income tax credits generated in the period.
This decrease was partially offset by loss jurisdictions where full valuation allowances have been recorded and foreign income tax credits generated in the period. 47 Table of Contents Liquidity and Capital Resources As of December 31, 2023, our principal sources of liquidity have been cash provided by operations.
We offer services principally on a Transactional or Subscription basis (SaaS) or in the form of Professional Services or Software Licenses. Revenues are recognized when control of the promised goods or services are transferred to the Company’s customers, in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services.
Revenues are recognized when control of the promised goods or services are transferred to the Company’s customers, in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services. The Company generates all of its revenue from contracts with customers.
At December 31, 2022, our non-U.S. subsidiaries held approximately $9.4 million of cash and cash equivalents that are available for use by all of our operations around the world. At this time, we believe the funds held by all non-U.S. subsidiaries will be permanently reinvested outside of the U.S.
Our cash and cash equivalents balance was $24.6 million at December 31, 2023. At December 31, 2023, our non-U.S. subsidiaries held approximately $8.2 million of cash and cash equivalents that are available for use by all of our operations around the world.
The future success of our business depends on the continued growth of Business-to-Business and Business-to-Business-to-Consumer driving customer transactions, and continued expansion of our platforms into the TMT market globally through Cloud, Messaging and Digital markets.
Revenues We generate most of our revenues on a subscription basis, which is derived from contracts that extend up to 48 months from execution. The future success of our business depends on the continued growth of Business-to-Business and Business-to-Business-to-Consumer driving customer transactions, and continued expansion of our platforms into the TMT market globally through cloud markets.
We recognize any impairment loss in operating income. 53 Table of Contents The fair value measurement associated with the quantitative goodwill impairment test is based on significant inputs that are not observable in the market and thus represents a Level 3 measurement.
The fair value measurement associated with the quantitative goodwill impairment test is based on significant inputs that are not observable in the market and thus represents a Level 3 measurement. Significant changes in the underlying assumptions used to value goodwill could significantly increase or decrease the fair value estimates used for impairment assessments.
Due to the timing and circumstances of repatriation of such earnings, if any, it is not practicable to determine the unrecognized deferred tax liability relating to such amounts. Goodwill Goodwill is our largest intangible asset. At December 31, 2022, our goodwill balance was $210.9 million, representing approximately 53% of total assets.
The Company continues to assert permanent reinvestment of foreign earnings in all other foreign jurisdictions. Due to the timing and circumstances of repatriation of such earnings, if any, it is not practicable to determine the unrecognized deferred tax liability relating to such amounts. Goodwill Goodwill is our largest intangible asset.
The CARES Act amends the Net Operating Loss provisions of the Tax Cuts and Jobs Act, allowing for the carryback of losses arising in tax years 2018, 2019 and 2020, to each of the five taxable years preceding the taxable year of loss.
The CARES Act amends the Net Operating Loss provisions of the Tax Cuts and Jobs Act, allowing for the carryback of losses arising in tax years 2018, 2019 and 2020, to each of the five taxable years preceding the taxable year of loss. 53 Table of Contents Since we conduct operations on a global basis, our effective tax rate has and will depend upon the geographic distribution of our pre-tax earnings among locations with varying tax rates.
Due to the timing and circumstances of repatriation of these earnings, if any, it is not practical to determine the unrecognized deferred tax liability related to the amount.
The Company continues to assert permanent reinvestment of foreign earnings in all other foreign jurisdictions. Due to the timing and circumstances of repatriation of such earnings, if any, it is not practicable to determine the unrecognized deferred tax liability relating to such amounts.
The underlying deliverable is owned and controlled by the customer and does not create an asset with an alternative use to us. The Company recognizes revenue on fixed fee contracts on the proportion of labor hours expended to the total hours expected to complete the contract performance obligation.
The underlying deliverable is owned and controlled by the customer and does not create an asset with an alternative use to us.
The need for the content from these devices to be stored in a common cloud is also expected to drive our business in the longer term.
The need for the content from these devices to be stored in a common cloud is also expected to drive our business in the longer term. 46 Table of Contents Discussion of the Consolidated Statements of Continuing Operations The following table presents an overview of our results of operations for the years ended December 31, 2023 and 2022 (in thousands).
Payments Due by Period Total 2023 2024-2026 2027-2028 Thereafter Finance lease obligations $ 940 $ 483 $ 457 $ — $ — Interest 44,307 11,815 32,492 — — Operating lease obligations 42,516 8,007 24,045 10,464 — Purchase obligations 1 48,599 20,343 28,256 — — Senior Note Payable 141,077 — 141,077 — — Total $ 277,439 $ 40,648 $ 226,327 $ 10,464 $ — _____________________________ 1 Amounts represent obligations associated with colocation agreements and other customer delivery related purchase obligations. 50 Table of Contents Uncertain Tax Positions Unrecognized tax positions are $4.4 million at December 31, 2022.
Payments Due by Period Total 2024 2025-2027 2028 Thereafter Finance lease obligations $ 1,221 $ 616 $ 605 $ — $ — Interest 32,492 11,815 20,677 — — Operating lease obligations 34,205 7,970 21,959 4,276 — Purchase obligations 1 31,085 17,729 13,356 — — Senior Note Payable 141,077 — 141,077 — — Total $ 240,080 $ 38,130 $ 197,674 $ 4,276 $ — _____________________________ 1 Amounts represent obligations associated with colocation agreements and other customer delivery related purchase obligations. 51 Table of Contents Uncertain Tax Positions Unrecognized tax benefits associated with uncertain tax positions are $4.4 million at December 31, 2023.
The Company recognized approximately $1.9 million in related income tax expense and $7.2 million in related income tax benefit during the years ended December 31, 2022 and 2021, respectively.
The increase was primarily attributable to increased amortization of capitalized software as we continue to invest in our cloud technology. Income tax. The Company recognized approximately $4.7 million in related income tax expense and $0.1 million in related income tax benefit during the years ended December 31, 2023 and 2022, respectively.
The cash used for investing activities in the current year and prior year was primarily related to increased investment in product development for our Cloud offering and capitalization of associated labor costs. This investment was offset in the current period by the $8 million of cash received as part of the DXP Business sale.
The cash provided in the current year was driven by the proceeds from the divestiture of the Messaging and NetworkX businesses, which was partially offset by increased investment in product development for our Cloud offering and capitalization of associated labor costs.
Summary of Significant Accounting Policies. There were no significant changes in our critical accounting policies and estimates discussed in our Form 10-K during the year ended December 31, 2022. Revenue Recognition and Deferred Revenue The Company generates revenue from the delivery of a range of products, solutions and services for operators, enterprises, OEMs and technology providers.
Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K . There were no significant changes in our critical accounting policies and estimates discussed in our Form 10-K during the year ended December 31, 2023.
Our policy has been to leave our cumulative unremitted foreign earnings invested indefinitely outside the United States, and we intend to continue this policy. Although the transition tax in the TCJA has removed U.S. federal taxes on distributions to the U.S. on a go forward basis, the Company continues to assert permanent reinvestment of foreign earnings.
Our policy has been to leave our cumulative unremitted foreign earnings invested indefinitely outside the United States, and we intend to continue this policy for most of our foreign subsidiaries. During 2023, we changed our indefinite reinvestment assertion for our Indian subsidiary and recorded a deferred tax liability associated with the outside basis difference.
The increase of cash provided by operating activities of $12.4 million was mainly driven by continued growth in cloud subscribers, reduced operating costs, and $4.3 million federal tax refunds received in the second quarter of 2022.
The cash provided by operating activities for fiscal 2023 and 2022 is mainly driven by continued growth in cloud subscribers, reduced operating costs, and improved margins as the business focuses on Cloud.
The change in revenue was partially offset by Cloud subscriber growth. Cost of revenues decreased $17.3 million to $91.7 million for the year ended December 31, 2022, compared to the same period in 2021. The decrease in 2022 is primarily attributable to the year over year change in revenue and favorable shift to higher margin products.
Cost of revenues decreased $4.3 million to $42.2 million for the year ended December 31, 2023, compared to the same period in 2022. The 2023 decrease was mainly driven by a decrease in revenue and improved gross margins as the Company continues to optimize our cost structure as we enhance our focus on higher margin cloud products post divestiture.
The restructuring charges were primarily driven by our strategic cost savings initiatives to streamline our business operations, reduce headcount and align our resources with our key strategic priorities. Depreciation and amortizati on expense decreased $4.3 million for the year ended December 31, 2022.
The restructuring charges primarily related to employment termination costs as a result of the work-force reductions initiated post divestiture to reduce operating costs and align our resources with our key strategic priorities. Depreciation and amortizati on expense increased $2.1 million for the year ended December 31, 2023.
Since we conduct operations on a global basis, our effective tax rate has and will depend upon the geographic distribution of our pre-tax earnings among locations with varying tax rates. We account for the effects of income taxes that result from our 52 Table of Contents activities during the current and preceding years.
We account for the effects of income taxes that result from our activities during the current and preceding years.
Research and development expense decreased $8.7 million to $55.6 million for the year ended December 31, 2022, compared to the same period in 2021. Consistent with prior year, the decrease in 2022 is primarily attributable our continued efforts to reduce spend and cost savings from the DXP Business unit divestiture.
Research and development expense decreased $3.0 million to $46.6 million for the year ended December 31, 2023, compared to the same period in 2022. The research and development costs decreased year over year mainly as a result of continued strategic efforts to streamline our product enhancements and developments.
The Company applies a measure of progress (typically time-based) to any fixed consideration and allocates variable consideration to the distinct periods of service based on usage, under Topic 606 Section 10-25-14(b).
The Company applies the variable consideration allocation exception when the terms of variable payment relate specifically to efforts to satisfy the performance obligation or the transfer of service based on usage within the corresponding period, under Topic 606 Section 10-25-14(b) – in such situations the revenue booked and the revenue billed for any month are the same.
Selling, general and administrative expense decreased $14.7 million to $70.3 million for the year ended December 31, 2022, compared to the same period in 2021. The decrease is primarily driven by executed cost savings initiatives which included headcount reductions, reduced vendor spending and lower facility costs. Restructuring charges were $1.9 million for the year ended December 31, 2022.
Selling, general and administrative expense increased $4.1 million to $65.2 million for the year ended December 31, 2023, compared to the same period in 2022.
Removed
Revenues We generate most of our revenues on a subscription or per transaction basis, which is derived from contracts that extend up to 60 months from execution.
Added
Of these customers, Verizon accounted for more than 10% of the Company’s revenues in 2023, 2022, and 2021; and AT&T accounted for more than 10% of the Company’s revenues in 2023. The loss of Verizon or AT&T as a customer would have a material negative impact on our company.
Removed
The loss of Verizon as a customer would have a material negative impact on our company. However, we believe that the costs incurred and subscriber disruption by Verizon to replace Synchronoss’ solutions would be substantial.
Added
However, we believe that the costs incurred and subscriber disruption by Verizon or AT&T to replace Synchronoss’ solutions would be substantial. Key Developments Discontinued Operations On October 31, 2023, Synchronoss Technologies, Inc. entered into an Asset Purchase Agreement with Lumine Group Software Solutions (Ireland) Limited, pursuant to which the Company sold its Messaging and NetworkX businesses.
Removed
Business from our traditional Synchronoss Messaging business (email) has been driven by a resurgence in the need for white label secure messaging platforms that favor the Mobile Network Operator’s (“MNO”) business objectives and are not beholden to the objectives of a sponsoring over-the-top (“OTT”) platform.
Added
This transaction represents a strategic shift designed to maximize shareholder value and allow the Company to solely focus on providing cloud-centric solutions. In connection with the sale transaction, the Company determined its Messaging and NetworkX Businesses qualified for discontinued operations accounting treatment in accordance with ASC 205-20.
Removed
We believe that advanced messaging drives higher subscriber engagement than any other application in the market today and holds the potential to stimulate new revenue from traditional services and third-party brands.
Added
Accordingly, the operating results of, and costs to separate the Messaging and NetworkX businesses are reported in Net loss from discontinued operations, net of taxes in the Consolidated Statements of Operations for all periods presented.
Removed
OTT global success has driven MNOs to look at opportunities to preempt and compete with the OTTs which provides a potential opportunity for Synchronoss’ future growth to be driven by the need of TMT companies including (and especially) MNOs to embrace Messaging as a Platform (“MaaP”).
Added
In addition, the related assets and liabilities held prior to the sale are reported as Assets and liabilities of discontinued operations on the Consolidated Balance Sheets. The notes to the financial statements have been adjusted on a retrospective basis. For additional information, see Note 4.
Removed
MaaP will allow TMT and MNOs to converse with subscribers in an efficient, automated way by streamlining the costs and increasing the effectiveness of self-care, as well as yielding cross-sell upselling of service plans, devices, bundles, etc.
Added
Year Ended December 31, 2023 vs 2022 2023 2022 $ Change Net revenues $ 164,196 $ 173,756 $ (9,560) Cost of revenues 1 42,218 46,500 (4,282) Research and development 46,565 49,598 (3,033) Selling, general and administrative 65,216 61,153 4,063 Restructuring charges 4,013 1,443 2,570 Depreciation and amortization 16,830 14,756 2,074 Total costs and expenses 174,842 173,450 1,392 (Loss) income from operations $ (10,646) $ 306 $ (10,952) ________________________________ 1 Cost of revenues excludes depreciation and amortization which are shown separately.
Removed
The Synchronoss Advanced Messaging Platform provides state of the art RCS-driven features including the ability to support advanced Peer to Peer communications and introduce new revenue streams driven by commerce and advertising via Application-to-Person capabilities.
Added
The overall change in revenue was primarily due to the runoff of deferred revenue recognized in the first half of 2022 and revenue recognized from the DXP and Activation assets prior to the divestiture in the prior period . The decrease in revenue was partially offset by continued cloud subscriber growth and professional services associated with the launch of SoftBank.
Removed
To support our growth, which we expect to be driven by these favorable industry trends mentioned above, we plan to leverage modular components from our existing software platforms to build new products. We believe that these opportunities will continue to provide future benefits and position us for future revenue growth.
Added
The increase in selling, general and administrative expense is mainly related to the write-down of the STIN Note receivable of $4.8 million , change in contingent consideration for iQmetrix of $1.5 million , and non-recurring professional fees. Restructuring charges were $4.0 million and $1.4 million for the year ended December 31, 2023 and 2022.
Removed
We are also making investments in research and development of new products designed to enable us to grow rapidly in the mobile wireless market. Our purchase of capital 45 Table of Contents assets and equipment may also increase based on aggressive deployment, subscriber growth and promotional offers for free or bundled storage by our major Tier 1 carrier customers.
Added
The effective tax rate was approximately (16.2)% for the year ended December 31, 2023, which was lower than the U.S. federal statutory rate primarily due to the impact of Global Intangible Low-Taxed Income, attributable to income in foreign jurisdictions and the impact of the U.S. capitalization of research expenses, and the impact of recognizing a deferred tax liability associated with changes in management’s indefinite reinvestment assertion under APB 23.
Removed
We continue to expand our platforms into the converging TMT, MNO, and Digital spaces to enable connected devices to do more things across multiple networks, brands and communities. Our initiatives with our customers continue to grow both with regard to our current business as well as our new product offerings.
Added
This decrease was partially offset by loss jurisdictions where full valuation allowances have been recorded, foreign rate differential and GAAP to statutory adjustments.
Removed
We are also exploring additional opportunities to support our customer, product and geographic diversification strategies. Discussion of the Consolidated Statements of Operations The following table presents an overview of our results of operations for the years ended December 31, 2022 and 2021 (in thousands).
Added
Revenue Recognition and Deferred Revenue The Company generates revenue from the delivery of a range of products, solutions and services for operators, enterprises, OEMs and technology providers. We offer services principally on a Transactional or Subscription basis (SaaS) or in the form of Professional Services or Software Licenses.
Removed
Twelve Months Ended December 31, 2022 vs 2021 2022 2021 $ Change Net revenues $ 252,628 $ 280,615 $ (27,987) Cost of revenues 1 91,702 109,050 (17,348) Research and development 55,620 64,337 (8,717) Selling, general and administrative 70,326 84,991 (14,665) Restructuring charges 1,905 5,189 (3,284) Depreciation and amortization 31,753 36,065 (4,312) Total costs and expenses 251,306 299,632 (48,326) Income (loss) from operations $ 1,322 $ (19,017) $ 20,339 ________________________________ 1 Cost of revenues excludes depreciation and amortization which are shown separately.
Added
The Company recognizes revenue on fixed fee contracts on the proportion of labor hours expended to the total hours expected to complete the contract performance obligation, or ratably to the extent the level of effort to satisfy the performance obligation is materially consistent each period.
Removed
The overall change in revenue was a result of the dissolution of CCMI in the prior year, expected impact from the sale and product sunsetting of the non-strategic DXP and Activation assets earlier in 2022, the expected deferred revenue run-off in the current quarter, unfavorable foreign exchange impact related to current macroeconomic conditions and temporary slowdowns in purchasing activity.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

3 edited+0 added−1 removed7 unchanged
Biggest changeOur cash and cash equivalents at December 31, 2022 and December 31, 2021 were invested in liquid money market accounts, certificates of deposit and government securities. All market-risk sensitive instruments were entered into for non-trading purposes.
Biggest changeOur cash and cash equivalents at December 31, 2023 and December 31, 2022 were invested in liquid money market accounts and certificates of deposit. All market-risk sensitive instruments were entered into for non-trading purposes.
A hypothetical 100 basis point movement in interest rates applicable to our cash and cash equivalents outstanding at December 31, 2022 would increase interest income by approximately $0.2 million on an annual basis. 55 Table of Contents
A hypothetical 100 basis point movement in interest rates applicable to our cash and cash equivalents outstanding at December 31, 2023 would increase interest income by approximately $0.2 million on an annual basis. 56 Table of Contents
We deposit our excess cash in what we believe are high-quality financial instruments, primarily money market funds and certificates of deposit and, we may be exposed to market risks related to changes in interest rates.
We deposit our excess cash in what we believe are high-quality financial instruments, primarily money market funds and certificates of deposit and, we may be exposed to market risks related to changes in interest rates. These investments are denominated in United States dollars.
Removed
We do not actively manage the risk of interest rate fluctuations on our marketable securities; however, such risk is mitigated by the relatively short-term nature of these investments. These investments are denominated in United States dollars.

Other SNCR 10-K year-over-year comparisons