UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 25, 2012

Synacor, Inc.
(Exact name of registrant as specified in its charter)

 
					
Delaware	 	001-33843	 	16-1542712	
(State or other jurisdiction
of incorporation)	 	(Commission
File Number)	 	(IRS Employer
Identification No.)	
		
40 La Riviere Drive, Suite 300,
Buffalo, New York	 	14202	
(Address of principal executive offices)	 	(Zip Code)	
Registrant’s telephone number, including area code: (716) 853-1362

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)	
 
¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)	
 
¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))	
 
¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))	

 

Item 2.02.	Results of Operations and Financial Condition.	
On July 25, 2012, Synacor, Inc. issued a press release announcing its financial results for the quarter ended June 30, 2012. The full text of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
This information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
 
Item 9.01.	Financial Statements and Exhibits.	
(d) Exhibits.

Exhibit No.	  	Description	
		
99.1	  	Press release issued by Synacor, Inc. dated July 25, 2012	

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	 		 	Synacor, Inc.	
				
Date: July 25, 2012	 		 	By:	 	/ S / W ILLIAM J. S TUART	
	 		 		 	William J. Stuart	
	 		 		 	Chief Financial Officer and Secretary	

Exhibit 99.1

Synacor Reports Solid Second Quarter 2012 Results
 
 	•	 	Quarterly revenue of $30.8 million, an increase of 58% year-over-year	
 	•	 	Quarterly adjusted EBITDA of $3.0 million vs. $1.5 million in prior year	
Buffalo, NY (GLOBE NEWSWIRE—July 25, 2012) —Synacor, Inc. (NASDAQ: SYNC), provider of the leading platform enabling cable, satellite, telecom and consumer electronics companies to authenticate their consumers and deliver digital entertainment, TV Everywhere, and cloud-based services across multiple devices, today announced its financial results for the second quarter of 2012.
“The second quarter was the beginning of an exciting period for Synacor, exemplified by increased display advertising and subscriber-based revenue, as well as breakthrough moments for TV Everywhere. Nearly 40 pay-TV operators are utilizing Synacor’s authentication technology to provide more than 25 million consumers multi-device access to NBC Universal’s TV Everywhere offerings of the 2012 London Summer Olympics,” said Ron Frankel, Synacor CEO. “We are witnessing a fundamental transformation in the way consumers enjoy their content on multiple devices, and Synacor’s ability to deliver authentication for TV Everywhere and other cloud-based services secures our leadership position. We’re excited about our growth opportunities and believe we’ve just scratched the surface of our potential.”
Q2 2012 Financial Results
Total Revenue : For the second quarter of 2012, total revenue was $30.8 million, a 58% increase over $19.5 million in the second quarter of 2011. Search and display advertising revenue was $25.4 million, a 69% increase compared to $15.1 million in the second quarter of 2011. Subscription-based revenue was $5.4 million, a 22% increase compared to $4.4 million in the second quarter of 2011.
Net Income : For the second quarter of 2012, net income was $1.2 million, compared to $0.6 million in the second quarter of 2011. Diluted earnings per share, or EPS, was $0.04. Net income includes stock-based compensation expense of $0.4 million, or $.01 per share, in the second quarter of 2012 and $0.2 million, or $0.01 per share, in the second quarter of 2011. The diluted EPS calculation for the second quarter of 2012 is based on 29.6 million weighted average fully diluted common shares outstanding.
Adjusted EBITDA : For the second quarter of 2012, adjusted EBITDA, which excludes stock-based compensation, was $3.0 million, or 10% of revenue, compared to $1.5 million, or 7% of revenue, in the second quarter of 2011.
Key Business Metrics : For the second quarter of 2012, Synacor averaged 20 million unique visitors per month, an increase of 43% from 14 million unique visitors in the second quarter of 2011. Search queries were 238 million for the second quarter, an increase of 55% from 154 million in the second quarter of 2011. Advertising impressions grew 72% to 10 billion, compared to 6 billion in the second quarter of 2011.

 
Cash : For the second quarter of 2012, Synacor generated $4.0 million in cash from operating activities, compared to $0.9 million in the second quarter of 2011. The company ended the second quarter of 2012 with $35.1 million in cash and cash equivalents, compared to $33.1 million at the end of the prior quarter.
“In the second quarter of 2012, Synacor once again achieved solid financial performance in revenue and adjusted EBITDA,” said Bill Stuart, Synacor CFO. “As we move into the second half of 2012, Synacor will continue to capitalize on our unique positioning in cloud-based services and video distribution, building upon the strong financial foundation we have established.”
Business Outlook
Based on information available as of July 25, 2012, the company is providing financial guidance for the third quarter and fiscal 2012 as follows:
 
 	•	 	Q3 2012 Guidance : Revenue for the third quarter of 2012 is projected to be in the range of $28.0 million to $28.5 million. For the third quarter of 2012, the company expects to report adjusted EBITDA of $2.0 million to $2.2 million.	
 	•	 	Fiscal 2012 Guidance : Revenue for the full year of 2012 is projected to be near the lower end of the existing guidance range of $123.0 million to $126.0 million. For the full year of 2012, the company expects to report adjusted EBITDA of $12.0 million to $13.0 million.	
Conference Call Details
Synacor will host a conference call today at 5 p.m. ET to discuss the second quarter 2012 financial results with the investment community. The live webcast of Synacor’s earnings conference call can be accessed at http://investor.synacor.com/events.cfm . To participate, please login approximately ten minutes prior to the webcast. For those without access to the Internet, the call may be accessed toll-free via phone at (877) 837-3911, with conference ID 98776667, or callers outside the U.S. may dial (253) 237-1167. Following completion of the call, a recorded webcast replay will be available on Synacor’s website through August 8, 2012. To listen to the telephone replay, call toll-free (855) 859-2056, or callers outside the U.S. may dial (404) 537-3406. The conference ID is 98776667.
About Synacor
Synacor’s customer-branded platform enables cable, satellite, telecom and consumer electronics companies to deliver TV Everywhere, digital entertainment, services and apps to their end-consumers, strengthening those relationships while monetizing the engagement. Synacor is headquartered in Buffalo, NY. For more information, visit synacor.com . Integrate. Authenticate. Engage.

 
Non-GAAP Financial Measures
The company uses certain non-GAAP financial measures in this release. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with generally accepted accounting principles (GAAP).
We report adjusted EBITDA because it is a key measure used by our management and board of directors to understand and evaluate our core operating performance and trends, to prepare and approve our annual budget and to develop short- and long-term operational plans. In particular, the exclusion of certain expenses in calculating adjusted EBITDA can provide a useful measure for period-to-period comparisons of our core business. Accordingly, we believe that adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors.
For a reconciliation of adjusted EBITDA to net income, the most directly comparable financial measure calculated and presented in accordance with GAAP, please refer to the table “Reconciliation of GAAP to Non-GAAP Measures” in this press release.
Safe Harbor Statement
“Safe Harbor” statement under the Private Securities Litigation Reform Act of 1995: This press release contains forward-looking statements concerning Synacor’s expected financial performance (including, without limitation, statements and information in the Business Outlook section and the quotations from management), as well as Synacor’s strategic and operational plans. The achievement or success of the matters covered by such forward-looking statements involves risks, uncertainties and assumptions. If any such risks or uncertainties materialize or if any of the assumptions prove incorrect, the company’s results could differ materially from the results expressed or implied by the forward-looking statements the company makes.
The risks and uncertainties referred to above include—but are not limited to—risks associated with: execution of our plans and strategies; the loss of a significant customer; expectations regarding consumer taste and user adoption of applications and solutions; general economic conditions; expectations regarding the company’s ability to timely expand the breadth of services and products or introduction of new services and products; consolidation within the cable and telecommunications industries; changes in the

 
competitive dynamics in the market for online search and display advertising; the risk that security measures could be breached and unauthorized access to subscriber data could be obtained; potential third party intellectual property infringement claims; and the price volatility of our common stock.
Further information on these and other factors that could affect the company’s financial results is included in filings it makes with the Securities and Exchange Commission from time to time, including the section entitled “Risk Factors” in the company’s most recent Form 10-Q filed with the SEC on May 15, 2012. These documents are available on the SEC Filings section of the Investor Information section of the company’s website at  http://investor.synacor.com/ . All information provided in this release and in the attachments is available as of July 25, 2012, and Synacor undertakes no duty to update this information.
Contacts
Investor Contact:
Denise Garcia, SVP
ICR
ir@synacor.com
716-362-3309
Press Contact:
Meredith Roth, VP, Corporate Communications
mroth@synacor.com
646-380-5141
The Synacor logo is available at
http://www.globenewswire.com/newsroom/prs/?pkgid=11609

 
Synacor, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)

 	  	As of
December 31,	 	 	As of
June 30,	 	
 	  	2011	 	 	2012	 	
Assets	  				 				
Current assets:	  				 				
Cash and cash equivalents	  	$	10,925	  	 	$	35,058	  	
Accounts receivable, net	  	 	14,336	  	 	 	15,507	  	
Deferred income taxes	  	 	3,534	  	 	 	4,777	  	
Prepaid expenses and other current assets	  	 	1,811	  	 	 	2,612	  	
	  	 	 	 	 	 	 	 	
Total current assets	  	 	30,606	  	 	 	57,954	  	
Property and equipment, net	  	 	8,301	  	 	 	10,756	  	
Deferred income taxes, non-current	  	 	2,549	  	 	 	690	  	
Other long-term assets	  	 	1,926	  	 	 	803	  	
Goodwill	  	 	—  	  	 	 	819	  	
	  	 	 	 	 	 	 	 	
Total Assets	  	$	43,382	  	 	$	71,022	  	
	  	 	 	 	 	 	 	 	
Liabilities and Stockholders’ Equity	  				 				
Current liabilities:	  				 				
Accounts payable	  	$	12,498	  	 	$	12,666	  	
Accrued expenses and other current liabilities	  	 	5,492	  	 	 	5,326	  	
Current portion of bank financing	  	 	250	  	 	 	—  	  	
Current portion of capital lease obligations	  	 	1,593	  	 	 	2,408	  	
	  	 	 	 	 	 	 	 	
Total current liabilities	  	 	19,833	  	 	 	20,400	  	
Long-term portion of capital lease obligation	  	 	2,098	  	 	 	2,732	  	
Other long-term liabilities	  	 	71	  	 	 	135	  	
	  	 	 	 	 	 	 	 	
Total Liabilities	  	 	22,002	  	 	 	23,267	  	
	  	 	 	 	 	 	 	 	
Stockholders’ Equity:	  				 				
Common stock	  	 	31	  	 	 	272	  	
Preferred stock	  	 	28,432	  	 	 	—  	  	
Treasury stock	  	 	(569	) 	 	 	(569	) 	
Additional paid-in capital	  	 	45,639	  	 	 	97,823	  	
Accumulated other comprehensive income	  	 	—  	  	 	 	9	  	
Accumulated deficit	  	 	(52,153	) 	 	 	(49,780	) 	
	  	 	 	 	 	 	 	 	
Total stockholders’ equity	  	 	21,380	  	 	 	47,755	  	
	  	 	 	 	 	 	 	 	
Total liabilities and stockholders’ equity	  	$	43,382	  	 	$	71,022	  	

 
Synacor, Inc.
Condensed Consolidated Statements of Operations
(In thousands except share and per share amounts)
(Unaudited)

 	  	Three months ended
June 30,	 	 	Six months ended
June 30,	 	
 	  	2011	 	 	2012	 	 	2011	 	 	2012	 	
Revenue	  	$	19,467	  	 	$	30,807	  	 	$	38,161	  	 	$	61,477	  	
Costs and operating expenses:	  				 				 				 				
Cost of revenue (1)	  	 	10,078	  	 	 	16,876	  	 	 	20,058	  	 	 	33,640	  	
Research and development (1)(2)	  	 	4,718	  	 	 	6,123	  	 	 	9,320	  	 	 	12,411	  	
Sales and marketing (2)	  	 	1,888	  	 	 	2,399	  	 	 	3,684	  	 	 	4,776	  	
General and administrative (1)(2)	  	 	1,512	  	 	 	2,868	  	 	 	3,063	  	 	 	5,708	  	
Depreciation	  	 	657	  	 	 	934	  	 	 	1,277	  	 	 	1,715	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total costs and operating expenses	  	 	18,853	  	 	 	29,200	  	 	 	37,402	  	 	 	58,250	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income from operations	  	 	614	  	 	 	1,607	  	 	 	759	  	 	 	3,227	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Other income (expense)	  	 	—  	  	 	 	(18	) 	 	 	1	  	 	 	(18	) 	
Interest expense	  	 	(19	) 	 	 	(89	) 	 	 	(51	) 	 	 	(136	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income before income taxes	  	 	595	  	 	 	1,500	  	 	 	709	  	 	 	3,073	  	
Provision for income taxes	  	 	3	  	 	 	301	  	 	 	6	  	 	 	700	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income	  	 	592	  	 	 	1,199	  	 	 	703	  	 	 	2,373	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Undistributed earnings allocated to preferred stockholders	  	 	541	  	 	 	—  	  	 	 	642	  	 	 	—  	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income attributable to common stockholders	  	$	51	  	 	$	1,199	  	 	$	61	  	 	$	2,373	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income per share attributable to common stockholders:	  				 				 				 				
Basic	  	$	0.03	  	 	$	0.04	  	 	$	0.03	  	 	$	0.11	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Diluted	  	$	0.03	  	 	$	0.04	  	 	$	0.03	  	 	$	0.08	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Weighted average shares used to compute net income per share attributable to common stockholders:	  				 				 				 				
Basic	  	 	1,974,991	  	 	 	27,212,105	  	 	 	1,952,574	  	 	 	21,907,842	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Diluted	  	 	22,453,808	  	 	 	29,592,108	  	 	 	22,387,822	  	 	 	28,261,882	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Notes:
(1) Exclusive of depreciation shown separately.
(2) Includes stock-based compensation as follows:

 	  	Three months ended
June 30,	 	  	Six months ended
June 30,	 	
 	  	    2011    	 	  	    2012    	 	  	    2011    	 	  	    2012    	 	
Research and development	  	$	59	  	  	$	120	  	  	$	130	  	  	$	227	  	
Sales and marketing	  	 	41	  	  	 	99	  	  	 	90	  	  	 	173	  	
General and administrative	  	 	86	  	  	 	206	  	  	 	188	  	  	 	583	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
	  	$	186	  	  	$	425	  	  	$	408	  	  	$	983	  	

 
Synacor, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)

 	  	Six months ended
June 30,	 	
 	  	2011	 	 	2012	 	
Cash Flows from Operating Activities:	  				 				
Net income	  	$	703	  	 	$	2,373	  	
Adjustments to reconcile net income to net cash provided by operating activities:	  				 				
Depreciation	  	 	1,277	  	 	 	1,715	  	
Stock-based compensation expense	  	 	408	  	 	 	983	  	
Benefit from deferred income taxes	  	 	—  	  	 	 	616	  	
Change in assets and liabilities net of effect of acquisition:	  				 				
Accounts receivable, net	  	 	(83	) 	 	 	(1,171	) 	
Prepaid expenses and other current assets	  	 	(82	) 	 	 	(528	) 	
Other long-term assets	  	 	(350	) 	 	 	120	  	
Accounts payable	  	 	(1,419	) 	 	 	782	  	
Accrued expenses and other current liabilities	  	 	792	  	 	 	(155	) 	
Other long-term liabilities	  	 	(17	) 	 	 	64	  	
	  	 	 	 	 	 	 	 	
Net cash provided by operating activities	  	 	1,229	  	 	 	4,799	  	
	  	 	 	 	 	 	 	 	
Cash Flows from Investing Activities:	  				 				
Purchases of property and equipment	  	 	(1,184	) 	 	 	(2,040	) 	
Cash paid for business acquisition	  	 	—  	  	 	 	(600	) 	
	  	 	 	 	 	 	 	 	
Net cash used in investing activities	  	 	(1,184	) 	 	 	(2,640	) 	
	  	 	 	 	 	 	 	 	
Cash Flows from Financing Activities:	  				 				
Repayment on bank financing	  	 	(250	) 	 	 	(250	) 	
Repayments on capital lease obligations	  	 	(1,085	) 	 	 	(1,035	) 	
Proceeds from exercise of common stock options	  	 	17	  	 	 	639	  	
Proceeds from initial public offering	  	 	—  	  	 	 	25,364	  	
Initial public offering costs	  	 	—  	  	 	 	(2,753	) 	
	  	 	 	 	 	 	 	 	
Net cash (used in) provided by financing activities	  	 	(1,318	) 	 	 	21,965	  	
	  	 	 	 	 	 	 	 	
Effect of exchange rate changes on cash and cash equivalents	  	 	—  	  	 	 	9	  	
Net (Decrease) Increase in Cash and Cash Equivalents	  	 	(1,273	) 	 	 	24,133	  	
Cash and Cash Equivalents at beginning of period	  	 	5,412	  	 	 	10,925	  	
	  	 	 	 	 	 	 	 	
Cash and Cash Equivalents at end of period	  	$	4,139	  	 	$	35,058	  	

 
Synacor, Inc.
Reconciliation of GAAP to Non-GAAP Measures
(In thousands except share and per share data)
(Unaudited)
The following table presents a reconciliation of net income to adjusted EBITDA for each of the periods indicated:

 	  	Three months ended
June 30,	 	  	Six months ended
June 30,	 	
 	  	2011	 	  	2012	 	  	2011	 	 	2012	 	
Reconciliation of Adjusted EBITDA:	  				  				  				 				
Net income	  	$	592	  	  	$	1,199	  	  	$	703	  	 	$	2,373	  	
Provision for income taxes	  	 	3	  	  	 	301	  	  	 	6	  	 	 	700	  	
Interest expense	  	 	19	  	  	 	89	  	  	 	51	  	 	 	136	  	
Other (income) expense	  	 	—  	  	  	 	18	  	  	 	(1	) 	 	 	18	  	
Depreciation	  	 	657	  	  	 	934	  	  	 	1,277	  	 	 	1,715	  	
Stock-based compensation	  	 	186	  	  	 	425	  	  	 	408	  	 	 	983	  	
	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	
Adjusted EBITDA	  	$	1,457	  	  	$	2,966	  	  	$	2,444	  	 	$	5,925	  	

 
Synacor, Inc.
Key Business Metrics
(Unaudited)

 	  	Three months ended
June 30,	 	  	Six months ended
June 30,	 	
 	  	2011	 	  	2012	 	  	2011	 	  	2012	 	
Key Business Metrics:	  				  				  				  				
Unique Visitors (1)	  	 	13,888,227	  	  	 	19,927,835	  	  	 	12,840,152	  	  	 	20,610,455	  	
Search Queries (2)	  	 	153,862,860	  	  	 	238,348,816	  	  	 	300,141,210	  	  	 	509,126,605	  	
Advertising Impressions (3)	  	 	5,993,229,228	  	  	 	10,337,928,948	  	  	 	11,778,534,094	  	  	 	18,823,156,330	  	
Notes:
 	(1)	Reflects the number of unique visitors to our customers’ websites computed on an average monthly basis during the applicable period, as measured by comScore.	
 	(2)	Reflects the total number of search queries during the applicable period, as reported by Google.	
 	(3)	Reflects the total number of advertising impressions during the applicable period, as reported by DoubleClick and other partners.