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): March 13, 2019

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))	
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company           ☐  
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ☐

 

Item 2.02.	Results of Operations and Financial Condition.	
On March 13, 2019, Synacor, Inc. issued a press release announcing its financial results for the quarter and year ended December 31, 2018. 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 March 13, 2019		

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: March 13, 2019	 		 		 	By:	 	/s/ Timothy J. Heasley	
	 		 		 		 	Timothy J. Heasley	
	 		 		 		 	Chief Financial Officer and Secretary	

Exhibit 99.1

Synacor Exceeds 2018 Revenue Guidance,
Reports 11% Increase in Recurring Software Revenue
 
 	●	 	Announces shift to segment reporting in Q1 2019 for its Software and Advertising businesses	
 	●	 	2018 total revenue of $143.9 million exceeded guidance; recurring software revenue of $35.8 million grew 11% YoY	
 	●	 	2018 net loss narrowed to $7.6 million; Adj. EBITDA of $8.5 million, up 262% from a year ago	
 	●	 	Notable Q4 customer wins include 116 new Zimbra email enterprise and government customers, three-million-user Zimbra deal in Japan, and a new Cloud ID agreement with Newsy	
BUFFALO, N.Y., March  13, 2019 – Synacor, Inc. (Nasdaq: SYNC), the trusted technology development, multiplatform services and revenue partner for video, internet and communications providers, device manufacturers, governments and enterprises, today announced its financial results for the fourth quarter and full year ended December 31, 2018.
“We delivered strong operating results,” said Himesh Bhise, Synacor’s chief executive officer. “Our 2018 adjusted EBITDA of $8.5 million was up significantly from $2.3 million a year ago. High-margin recurring software revenue from our collaboration and identity platforms was $35.8 million, growing 11% year over year.”
“In 2019, we will continue to focus on this high-margin, recurring revenue. Along with our shift to segment reporting, we are aligning organizational processes to better drive performance in each of our Software and Advertising businesses. This is reflected in our adjusted EBITDA guidance of $10 million to $12 million, which is 18% to 42% higher than 2018,” added Bhise.
Recent Highlights
 
 	●	 	Closed a three-million-user, cloud-based email deal for a large Japanese telecommunications company, in partnership with IIJ.	
 	●	 	Signed 116 new Zimbra email business and government customers worldwide, bringing the 2018 total to 426 new customers.	
 	●	 	Signed Newsy, a next-generation national news network, to the growing list of content providers that use Synacor Cloud ID.	
 	●	 	The Zimbra X email and collaboration platform is now powered by Oracle Cloud and is available in the Oracle Cloud Marketplace.	
FY 2018 and Q4 2018 Financial Results
Revenue : For the fourth quarter of 2018, revenue was $39.4 million, exceeding the Company’s financial guidance. Advertising revenue was down 17% as the Company proactively steered away from low-margin publisher-based advertising revenue. Recurring software revenue grew 7.3% compared with the fourth quarter of 2017.
 
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For fiscal 2018, revenue was $143.9 million. Recurring software revenue was up 11% and Advertising revenue was up 2%.
Net Income : For the fourth quarter of 2018, net loss was $0.4 million, or $(0.01) per share, compared with a net loss of $0.1 million, or $(0.00) per share, in the fourth quarter of 2017. The fourth quarter of 2018 was negatively impacted by a $0.6 million capitalized software impairment.
For fiscal 2018, net loss narrowed to $7.6 million, or $(0.19) per share, compared with a net loss of $9.8 million, or $(0.27) per share, in fiscal 2017.
Adjusted EBITDA : For the fourth quarter of 2018, adjusted EBITDA increased 12.7% to $4.0 million from $3.6 million for the fourth quarter of 2017. Adjusted EBITDA excludes stock-based compensation, other income and expense, capitalized software impairment, restructuring costs, and certain legal and professional fees.
For fiscal 2018, adjusted EBITDA increased to $8.5 million, up from $2.3 million for fiscal 2017, an increase of 262%.
Cash : The Company ended the fourth quarter of 2018 with $15.9 million in cash and cash equivalents, compared with $15.7 million at the end of the third quarter of 2018.
Guidance
The Company will be moving to segment-based reporting in Q1 2019 to provide better transparency into its Software and Advertising businesses. Based on information available as of March 13, 2019, the Company is providing financial guidance for the first quarter and full year 2019 as follows:
 
 	•	 	Q1 2019 Guidance : Revenue for the first quarter of 2019 is projected to be in the range of $31 million to $33 million. The Company expects to report a net loss of $2.6 million to $3.1 million and adjusted EBITDA of $1.0 million to $1.5 million, which excludes stock-based compensation expense of $0.5 million, certain legal and professional service fees of $0.8 million, depreciation and amortization expense of $2.5 million, and tax, interest expense and other income and expense of $0.3 million.	
 	•	 	Fiscal 2019 Guidance : Revenue for full year 2019 is expected to be in the range of $137 million to $145 million. The Company expects to report a net loss in the range of $2.2 million to $4.2 million and adjusted EBITDA in the range of $10 million to $12 million, which excludes stock-based compensation expense of $2.0 million, certain legal and professional service fees of $1.0 million, depreciation and amortization expense of $10.0 million, and tax, interest expense, and other income and expense of $1.2 million.	
Conference Call Details
Synacor will host a conference call today at 5:00 p.m. ET to discuss the fourth-quarter and fiscal year-end 2018 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 log in approximately 10 minutes prior to the webcast. The call may be accessed toll-free via phone at (833) 235-2655, with conference ID 8556108, or callers outside the U.S. may dial (647) 689-4151. Following completion of the call, a recorded webcast replay will be available on Synacor’s website. To listen to the telephone replay through March 20, 2019, call toll-free (800) 585-8367, or callers outside the U.S. may dial (416) 621-4642. The conference ID is 8556108.
 
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About Synacor
Synacor (Nasdaq: SYNC) is the trusted technology development, multiplatform services and revenue partner for video, Internet and communications providers, device manufacturers, governments and enterprises. Synacor’s mission is to enable its customers to better engage with their consumers. Its customers use Synacor’s technology platforms and services to scale their businesses and extend their subscriber relationships. Synacor delivers managed portals, advertising solutions, email and collaboration platforms, and cloud-based identity management. www.synacor.com
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 loss, 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 Under the Private Securities Litigation Reform Act of 1995
“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, its first-quarter and fiscal-year 2019 guidance, the statements and quotations from management and 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, including the loss of a significant customer; execution against our agreement with AT&T; the pace and degree to which the AT&T portal can be monetized; our ability to obtain new customers; our ability to integrate the assets and personnel from acquisitions; expectations regarding consumer taste and user adoption of applications and solutions; developments in internet browser software and search advertising technologies; 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 digital 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 or other legal claims against Synacor; and the price volatility of our common stock.
 
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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-K filed with the SEC. 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 March 13, 2019, and Synacor undertakes no duty to update this information.
Synacor, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)

 	  	December 31,
2018	 	  	December 31,
2017	 	
Assets	  				  				
Current assets:	  				  				
Cash and cash equivalents	  	    $	15,921    	 	  	    $	22,476    	 	
Accounts receivable, net	  	 	25,567  	 	  	 	31,696  	 	
Prepaid expenses and other current assets	  	 	3,779  	 	  	 	4,516  	 	
	  	 	 	 	  	 	 	 	
Total current assets	  	 	45,267  	 	  	 	58,688  	 	
Property and equipment, net	  	 	18,707  	 	  	 	20,505  	 	
Goodwill	  	 	15,941  	 	  	 	15,955  	 	
Intangible assets	  	 	10,553  	 	  	 	12,695  	 	
Other assets	  	 	995  	 	  	 	937  	 	
	  	 	 	 	  	 	 	 	
Total Assets	  	    $	              91,463    	 	  	    $	              108,780    	 	

Liabilities and Stockholders’ Equity	  				  				
Current liabilities:	  				  				
Accounts payable	  	    $	19,174    	 	  	    $	25,931    	 	
			
Accrued expenses and other current liabilities	  	 	7,849  	 	  	 	7,075  	 	
Current portion of deferred revenue	  	 	6,672  	 	  	 	11,605  	 	
Current portion of capital lease obligations	  	 	2,328  	 	  	 	2,444  	 	
	  	 	 	 	  	 	 	 	
Total current liabilities	  	 	36,023  	 	  	 	47,055  	 	
Long-term portion of capital lease obligations	  	 	1,367  	 	  	 	3,371  	 	
Deferred revenue	  	 	2,214  	 	  	 	3,682  	 	
Deferred income taxes	  	 	231  	 	  	 	264  	 	
Other long-term liabilities	  	 	457  	 	  	 	63  	 	
	  	 	 	 	  	 	 	 	
Total Liabilities	  	 	40,292  	 	  	 	54,435  	 	
	  	 	 	 	  	 	 	 	
Stockholders’ Equity:	  				  				
Common stock	  	 	399  	 	  	 	396  	 	
Treasury stock	  	 	(1,899)  	 	  	 	(1,881)  	 	
Additional paid-in capital	  	 	144,739  	 	  	 	142,486  	 	
Accumulated deficit	  	 	(91,726)  	 	  	 	(86,627)  	 	
Accumulated other comprehensive loss	  	 	(342)  	 	  	 	(29)  	 	
	  	 	 	 	  	 	 	 	
Total stockholders’ equity	  	 	51,171  	 	  	 	54,345  	 	
	  	 	 	 	  	 	 	 	
Total Liabilities and Stockholders’ Equity	  	    $	            91,463    	 	  	    $	            108,780    	 	

4

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

 	 	Three months ended	 	 	Twelve months ended	 	
 	 	December 31,	 	 	December 31,	 	
 	 	2018	 	 	2017	 	 	2018	 	 	2017	 	
					
Revenue	 	  $	39,398  	 	 	  $	46,002  	 	 	  $	143,879  	 	 	  $	140,027  	 	
Costs and operating expenses:	 				 				 				 				
Cost of revenue (1)	 	 	20,888  	 	 	 	25,409  	 	 	 	72,547  	 	 	 	70,053  	 	
Technology and development (1)(2)	 	 	5,737  	 	 	 	6,692  	 	 	 	24,510  	 	 	 	27,642  	 	
Sales and marketing (2)	 	 	5,609  	 	 	 	5,916  	 	 	 	24,116  	 	 	 	24,941  	 	
General and administrative (1)(2)	 	 	4,838  	 	 	 	4,980  	 	 	 	19,454  	 	 	 	17,800  	 	
Depreciation and amortization	 	 	2,325  	 	 	 	2,816  	 	 	 	9,641  	 	 	 	9,820  	 	

Total costs and operating expenses	 	 	39,397  	 	 	 	45,813  	 	 	 	150,268  	 	 	 	150,256  	 	

Gain (loss) from operations	 	 	1  	 	 	 	189  	 	 	 	(6,389)  	 	 	 	(10,229)  	 	
Gain on sale of investment	 	 	—  	 	 	 	85  	 	 	 	—  	 	 	 	1,987  	 	
Other expense - net	 	 	(166)  	 	 	 	(174)  	 	 	 	(212)  	 	 	 	(2)  	 	
Interest expense	 	 	(73)  	 	 	 	(105)  	 	 	 	(338)  	 	 	 	(433)  	 	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Loss before income taxes	 	 	(238)  	 	 	 	(5)  	 	 	 	(6,939)  	 	 	 	(8,677)  	 	
Provision for income taxes	 	 	138  	 	 	 	101  	 	 	 	616  	 	 	 	1,100  	 	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net loss	 	  $	(376)  	 	 	  $	(106)  	 	 	  $	(7,555)  	 	 	  $	(9,777)  	 	

Net loss per share:	 				 				 				 				
Basic	 	  $	(0.01)  	 	 	  $	(0.00)  	 	 	  $	(0.19)  	 	 	  $	(0.27)  	 	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Diluted	 	  $	(0.01)  	 	 	  $	(0.00)  	 	 	  $	(0.19)  	 	 	  $	(0.27)  	 	

Weighted average shares used to compute net loss per share:	 				 				 				 				
Basic	 	 	39,009,442  	 	 	 	38,727,724  	 	 	 	38,895,301  	 	 	 	36,381,299  	 	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Diluted	 	 	39,009,442  	 	 	 	38,727,724  	 	 	 	38,895,301  	 	 	 	36,381,299  	 	

Notes:	 				 				 				 				
(1) Exclusive of depreciation shown separately.	 				 				 				 				
(2) Includes stock-based compensation as follows:	 				 				 				 				
			
 	 	Three months ended	 	 	Twelve months ended	 	
 	 	December 31,	 	 	December 31,	 	
 	 	2018	 	 	2017	 	 	2018	 	 	2017	 	
Technology and development	 	  $	120  	 	 	  $	140  	 	 	  $	489  	 	 	  $	744  	 	
Sales and marketing	 	 	100  	 	 	 	136  	 	 	 	474  	 	 	 	636  	 	
General and administrative	 	 	133  	 	 	 	286  	 	 	 	841  	 	 	 	1,110  	 	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
	 	  $	353  	 	 	  $	562  	 	 	  $	1,804  	 	 	  $	2,490  	 	

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

 	  	Twelve months ended	 	
 	  	December 31,	 	
 	  	2018	 	  	2017	 	
Cash Flows from Operating Activities:	  				  				
			
Net loss	  	  $	(7,555)  	 	  	  $	(9,777)  	 	
Adjustments to reconcile net loss to net cash provided (used in) by operating activities:	  				  				
Depreciation and amortization	  	 	9,832  	 	  	 	9,820  	 	
Loss on disposal of property and equipment	  	 	—  	 	  	 	203  	 	
Capitalized software impairment	  	 	552  	 	  	 	256  	 	
Stock-based compensation expense	  	 	1,804  	 	  	 	2,490  	 	
Gain on sale of investment	  	 	—  	 	  	 	(1,987)  	 	
Provision for deferred income taxes	  	 	(248)  	 	  	 	137  	 	
Change in allowance for doubtful accounts	  	 	126  	 	  	 	(164)  	 	
Increase in estimated value of contingent consideration	  	 	—  	 	  	 	107  	 	
Change in operating assets and liabilities net of effect of acquisition:	  				  				
Accounts receivable, net	  	 	6,002  	 	  	 	(4,146)  	 	
Prepaid expenses and other assets	  	 	737  	 	  	 	346  	 	
Other long-term assets	  	 	142  	 	  	 	15  	 	
Accounts payable, accrued expenses, and other current liabilities	  	 	(5,785)  	 	  	 	3,261  	 	
Deferred revenue	  	 	(3,945)  	 	  	 	(779)  	 	
Other long-term liabilities	  	 	394  	 	  	 	(45)  	 	
	  	 	 	 	  	 	 	 	
Net cash provided (used in) by operating activities	  	 	2,056  	 	  	 	(263)  	 	
	  	 	 	 	  	 	 	 	
Cash Flows from Investing Activities:	  				  				
Proceeds from sale of investment	  	 	—  	 	  	 	2,645  	 	
Purchases of property and equipment	  	 	(6,256)  	 	  	 	(7,876)  	 	
	  	 	 	 	  	 	 	 	
Net cash used in investing activities	  	 	(6,256)  	 	  	 	(5,231)  	 	
	  	 	 	 	  	 	 	 	
Cash Flows from Financing Activities:	  				  				
Net proceeds from offering of common stock	  	 	—  	 	  	 	20,258  	 	
Payments of public offering issuance costs	  	 	—  	 	  	 	(212)  	 	
Repayments of long-term debt	  	 	—  	 	  	 	(5,000)  	 	
Repayments on capital lease obligations	  	 	(2,422)  	 	  	 	(1,866)  	 	
Proceeds from exercise of common stock options	  	 	385  	 	  	 	2,149  	 	
			
Purchase of treasury stock and shares received to satisfy minimum tax withholding liabilities	  	 	(18)  	 	  	 	(334)  	 	
Deferred acquisition payment	  	 	—  	 	  	 	(1,300)  	 	
	  	 	 	 	  	 	 	 	
Net cash (used in) provided by financing activities	  	 	(2,055)  	 	  	 	13,695  	 	
	  	 	 	 	  	 	 	 	
Effect of exchange rate changes on cash and cash equivalents	  	 	(300)  	 	  	 	(40)  	 	
	  	 	 	 	  	 	 	 	
Net (decrease) increase in Cash and Cash Equivalents	  	 	(6,555)  	 	  	 	8,161  	 	
Cash and Cash Equivalents at beginning of period	  	 	22,476  	 	  	 	14,315  	 	
	  	 	 	 	  	 	 	 	
Cash and Cash Equivalents at end of period	  	  $	        15,921   	 	  	  $	        22,476   	 	

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

 	  	  Three months ended  	 	  	  Twelve months ended  	 	
 	  	December 31,	 	  	December 31,	 	
 	  	2018	 	  	2017	 	  	2018	 	  	2017	 	
Reconciliation of Adjusted EBITDA:	  				  				  				  				
					
Net loss	  	  $	        (376)  	 	  	  $	        (106)  	 	  	  $	        (7,555)  	 	  	  $	        (9,777)  	 	
Provision for income taxes	  	 	138  	 	  	 	101  	 	  	 	616  	 	  	 	1,100  	 	
Interest expense	  	 	73  	 	  	 	105  	 	  	 	338  	 	  	 	433  	 	
Gain on sale of investment	  	 	—  	 	  	 	(85)  	 	  	 	—  	 	  	 	(1,987)  	 	
Other expense	  	 	166  	 	  	 	174  	 	  	 	212  	 	  	 	2  	 	
Depreciation and amortization	  	 	2,516  	 	  	 	2,816  	 	  	 	9,832  	 	  	 	9,820  	 	
Capitalized software impairment	  	 	552  	 	  	 	—  	 	  	 	552  	 	  	 	256  	 	
Stock-based compensation expense	  	 	353  	 	  	 	562  	 	  	 	1,804  	 	  	 	2,490  	 	
Restructuring costs	  	 	77  	 	  	 	—  	 	  	 	1,111  	 	  	 	—  	 	
Certain legal expenses*	  	 	367  	 	  	 	—  	 	  	 	1,400  	 	  	 	—  	 	
Certain professional services fees**	  	 	154  	 	  	 	—  	 	  	 	154  	 	  	 	—  	 	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Adjusted EBITDA	  	  $	4,020  	 	  	  $	3,567  	 	  	  $	8,464  	 	  	  $	2,337  	 	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
*    “Certain legal expenses” include legal fees and other related expenses associated with legal proceedings outside the ordinary course of our business, including the class action securities litigation, and arbitration costs related to the dissolution of a former joint venture.
** “Certain professional services fees” includes fees and expenses related to merger and acquisition activities.
Contacts
Investor Contact:
David Calusdian
Sharon Merrill Associates
ir@synacor.com
617-542-5300
 
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